MTS Group Sustainable Development Report

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MTS Group Sustainable 2015 Development Report G4-3 Full trade name of the Company in Russian: Публичное акционерное общество “Мобильные ТелеСистемы” G4-7 Short trade name of the Company in Russian: ПАО “МТС”

Full trade name of the Company in English: Mobile TeleSystems Public Joint Stock Company

Short trade name of the Company in English: MTS PJSC

In this report, the terms “MTS”, “the Company”, and the “MTS Group” shall refer to the group of companies consisting of MTS PJSC and its subsidiaries; MTS PJSC and “the Company” shall mean Mobile TeleSystems Public Joint Stock Company.

The indicators contained in this Annual Report are as of December 31, 2015, unless other periods or dates are expressly indicated.

The Annual Report of MTS PJSC for 2015 is available for downloading from report2015.mts.ru.

The interactive version of Sustainable Development Report of MTS Group for 2015 is available for downloading from our2015.mts.ru. Contents

Message from the President...... 2 5. Responsible Business...... 120

5.1. Shareholder Structure...... 122 1. About the MTS Group...... 6 5.2. Corporate Governance...... 124 1.1. About the Company...... 8 5.3. Risk Management...... 136 1.2. Our Markets...... 14 5.4. Compliance and Business Ethics...... 137 1.3. Business Model ...... 18 5.5. Transparent Procurement Procedures...... 145 1.4. CSR Strategy...... 20 5.6. Information Disclosure...... 149 1.5. Corporate Values...... 27 Additional Information...... 150 1.6. Stakeholder Engagement...... 30 Recognition of Achievements...... 152 2. MTS for the Benefit of Clients...... 34 About this Report...... 155 2.1. Telecommunication Infrastructure...... 38 GRI Content Index...... 161 2.2. Innovative Services...... 43 Glossary...... 167 2.3. Quality of Service...... 50 Contacts...... 170 2.4. Availability and Security of Services...... 53 Feedback Questionnaire...... 171 2.5. Customer privacy...... 58

3. MTS for the Benefit of Society...... 60

3.1. Social Programs...... 62 3.2. Cooperation with the State...... 84 3.3. Environmental Responsibility...... 85

4. MTS for the Benefit of Personnel...... 94

4.1. HR Policy...... 96 4.2. Personnel Structure...... 99 4.3. Motivation and Social Guarantees...... 104 4.4. Personnel Development and Training...... 107 4.5. Staff Recruitment and Adaptation...... 114 4.6. Occupational Health & Safety...... 116 4.7. Physical Culture and Sport...... 119 Message from the President G4-1 Dear friends,

We would like to present our 2015 Sustainable Development Report, in which we have tried to describe very thoroughly and openly the most important social aspects of the Company’s business, the successes and achievements in this area and our plans for the future development of corporate social responsibility. MTS regards the Sustainable Development Report as one of the most important elements of its interaction with society, helping the Company to build harmonious relationships with all of its stakeholders and to improve its transparency. It also helps us to look at our social activities from the outside and to see how we can improve its efficiency.

About the company

Our financial and economic performance in 2015 proves our to retain the crown of top service provider. When your market ability to move forward in the most adverse macroeconomic share exceeds 60%, keeping this position becomes very difficult; conditions. Even in the period of the general economy slow- nevertheless, the team of MTS Armenia do their best for that. down, our business continued to grow in the host countries. Our Throughout the year, MTS Belarus was actively implementing success is based on systematic work and close adherence to the its data strategy, and now more than 40% of its subscribers are chosen strategy. active users of mobile internet. The team of MTS Turkmenistan has yet to go the way of the rapid growth of data transmission By the end of 2015, the number of our subscribers in Russia grew services, but they are ready to do this. by 3.6% reaching 77.3 million. Our subsidiary MGTS grew from a fixed-line telephony service provider to a universal multi-service In 2016, we will face quite a number of challenges offered by operator. The expiring year was the first year of MTS operation the highly competitive market. We will have to demonstrate our in Uzbekistan after its comeback to that country. The company professionalism and experience that will enable us to remain in entered the market as a premium operator by offering high-qual- the eyes of our subscribers the best operator in the market of ity services to its clients. Today, more than a million subscribers each country. use the services of MTS-Uzbekistan. In Armenia, our goal was

For our clients

We lived a very interesting and eventful year, during which we network and began to massively deploy LTE networks in the managed to successfully implement a number of important pro- 1800 MHz band. In the first half of the year, we have accom- jects in the field of network development. We have accomplished plished 70% of the targeted scope of our network construction the development of a global super-fast 100 Gb/s backbone activities.

2015 Sustainable Development Report 3 We have also deployed the latest self-optimizing networks nue growth and achieved good market results by having met all technology all over Moscow, launched a Fixed Networks Man- targets faced by our Company. agement Centre and started deploying 3G in Ukraine. Equally important are our achievements in developing our IT infrastruc- And we will not lose momentum in the year to follow! Our plans ture - it would suffice to mention such large-scale and important include launching the advanced Voice over LTE technology and projects as the acquisition of NVision Group and implementing expanding the self-optimizing networks far beyond the bounda- Big Data projects. ries of Moscow. Our main goal will be to increase the return on investment. We will strive for the maximum network capacity MGTS grew from a fixed-line telephony service provider to a while keeping the costs as low as possible. multi-service universal operator. We demonstrated strong reve-

For the society

Well-developed telecommunication networks and a high rate of We are actively developing our own social programs and charity Internet penetration provide additional opportunities for devel- projects focused on supporting vulnerable social groups, provid- oping the Russia's economy and boosting the welfare of its peo- ing medical aid to sick children, boosting children's creativity. Last ple. Our priorities have always been – and will remain – socially year, we rendered help and support to more than one million peo- oriented. We focus not only on the construction of networks, ple and, overall, our corporate social responsibility projects cover launching new services and tariffs, but also on the training of above 10 million people. Our efforts were recognized by reputa- users, promoting innovation, new technologies and services able ble communities: we became the winner of the Runet Prize, the to de-facto improve quality of life. Leader in Corporate Charity, and were included in the shortlist of SABRE Awards for implementing our Generation M charity project.

For our employees

The degree of MTS staff involvement in the company affairs in As a result, by the end of 2015 we were recognized the best Russia is continually growing; this year, it reached 80 per cent. employer in Russia as per AoN Hewitt. We also are in the TOP-5 This means that four out of five our employees are confident in of the Russian Employers Rating and became the leader among our future, and are willing to grow with the company. telecommunication companies; we won the People Investor Prize and became a three-time winner of the Russian HR-Brand This year we have reaffirmed our commitment to offering maxi- Award. mum career opportunities to each of our employees. Eighty per cent of all manager vacancies have been filled from the company's talent pool.

For our stakeholders

In 2015, thanks to our efficient and prudent business strategy our long-term sustainable development based on the harmo- and skillful cash flow management, MTS paid to shareholders nious combination of business interests, human values and record-setting dividends amounting to RUB 52 billion. We are national development priorities. confident that the implementation of the 3D strategy will ensure

Yours faithfully, Andrey Dubovskov President of MTS PJSC

4 Message from the President Main results for 2015

The average per minute price MTS's financial services using of a call in Russia 0.85 RUB 15% of subscribers For customers Launch of LTE networks Satisfied with the service received in all operation areas in 2015 see p. 34 83 regions of Russia 90% of customers

Profit tax paid by MTS PJSC Corporate volunteer movement in 2015 JUST Give Good! totals

13 bln RUB 6,500 employees For society MTS Group investition Generation M project by MTS in CSR and charity projects won the Corporate Charity Leader Award 2015. see p. 60 760.4 mln RUB

In 2015, MTS Group's total payroll The level of MTS staff involvement costs grew by 14.5% making in the company affairs reached 56.2 bln RUB 80% For employees The average monthly salary In 2015, MTS was acknowledged as in MTS PJSC one of 11 best employers of Russia (according to the Aon Hewitt BEST see p. 94 64,000 RUB EMPLOYERS STUDY)

MTS Group's consolidated revenue Dividend paid out by MTS PJSC increased by 5% to in 2015 were record-high

431.2 bln RUB 52 bln RUB For shareholders MTS Group net profit amounted to Our financial statements for 2015 meet the IFRS standards. see p. 120 49.5 bln RUB

2015 Sustainable Development Report 5 About the MTS 1. Group

1.1. About the Company...... 8 1.2. Our Markets...... 14 1.3. Business Model ...... 18 1.4. CSR Strategy...... 20 1.5. Corporate Values...... 27 1.6. Stakeholder Engagement...... 30

1.1. About the Company

G4-4 Today, MTS is the leading telecommunications operator in Russia and the CIS. The company offers integrated mobile and fixed telephony, long-distance and international communications services, cable television, data transmission based on wireless and wireline solutions, including fiber-optic access technology and 3rd and 4th generation mobile networks, as well as financial services.

G4-6 In 2015, MTS Group operated in 83 regions of Russia and in five Ukraine (MTS UKRAINE PrJSC), the Republic of Armenia (K-Tele- CIS countries. com CJSC), the Republic of Turkmenistan (MTS-Turkmenistan ES), the Republic of Uzbekistan (Universal Mobile Systems LLC), as MTS PJSC holds license to operate in the entire territory of the well as the Republic of Belarus (Mobile TeleSystems JLLC). The Russian Federation. In the reporting year, subsidiaries of MTS total population of the area covered by MTS PJSC services exceeds PJSC continued to carry out their activity in the territory of 230 million people.

“Our work is aimed not only at rendering high-quality, beneficial and convenient services to the clients, as well as ensuring high service level, but we are also looking ahead: MTS opens up the doors to innovative future for the clients by improving services and launching advanced versions of these on the market. Today, our subscribers can quickly find the right information in the Internet, go shopping, pay for travels, buy tickets for concerts and movies, manage their finances and make many other useful and interesting things with the help of a mobile phone. However, we consider this only the beginning and are striving for further progress!

Our goal is to make sure that MTS clients are able to use the entire potential offered by modern mobile communication technologies. Every day, the highly skilled MTS team implements new ideas and projects to ensure that our clients of any income level in any region are able to use communication services as much as they want with no unforeseen costs.”

Andrey Dubovskov, MTS PJSC President

8 1.1. About the Company The structure of MTS

MTS Corporate Center

MTS Foreign MTS Russia MTS Ukraine Companies business unit business unit business unit

Macro-region Turkmenistan subsidiary

Region Belarus subsidiary

Armenia subsidiary

Uzbekistan subsidiary

2015 Sustainable Development Report 9 In 2015, MTS retained its leadership position in terms of the number of subscribers - as of December 31, 2015 the total number of subscribers in the host countries was 107.8, of which 77.3 million live in Russia. Revenue of MTS Group in 2015 was RUB 431.2 billion.

Structure of MTS revenue in 2015, RUB bln

Mobile communication services 333.7

Fixed-line services 57.0 431.2 bln RUB

Sales of goods 40.5

MTS revenue in 2015, %

Russia 90%

Ukraine 6%

Armenia 2%

Uzbekistan 1%

Turkmenistan 1%

10 1.1. About the Company Our brand

In 2015, MTS was ranked by Brand Finance research agency among the Global 500 most valuable and influ- ential companies along with Sberbank, Gazprom and Lukoil.1 The value of the company reached $3.6 billion. MTS dropped to 437th line from 390th which it held in 2014; its value changed by -9.45% mainly due to a change in the USD exchange rate. The company was the only Russian telecommunications brand included in the rating.

A re-branding of MTS in 2015 and a new emotional brand positioning “You know that you can!” received a special nomination “For bringing a new social and humanitarian touch to a technological brand” granted by Kotler Awards for accomplishments in the field of advertising and marketing.

You know that you can!

1 brandirectory.com/jl/54772a240ed8695a61de50520a370d38.

2015 Sustainable Development Report 11 History of the Company

2009 2010 2011

Start of development of MTS Purchase of a number of regional Signing of a memorandum with mono-brand retail chain (CJSC RTK) BBA and CTV operators, start of Skartel. Participation in the Union consolidation of MTS fixed assets. of LTE Communication Operators. Suspension of operation in Conclusion of Komstar-OTS Turkmenistan. Launch of the first acquisition by MTS in CIS PT network in Uzbekistan

2008 2007 2006

Conclusion of a strategic Acquisition of VtvaCelL, the Deep rebranding of the Company partnership with Vodafone. leading Armenian mobile operator Obtaining license for construction of UMTS network in Russia

1993 1994 1997

MTS company was founded by the Launch of services in the Moscow Start of the regional expansion landline communication operator licensed territory in Russia MGTS, Deutsche Telekom and Siemens companies and other investors

12 History of the Company 2015

Strategic partnership with Vodafone in Ukraine, MTS Ukraine re-branding

2012 2013 2014

Obtaining frequencies and the federal license Conclusion of an agreement between Alnmo, Presentation of new 3D strategy for provision of communication services MTS, Nomihold Security Inc. and other with the main focuses on Data, of LTE standard in Russia, launch of home related parties on settlement of disputes as Differentiation and Dividends network in Moscow. Acquisition of Tascom to investments in Bitel LLC, former largest CJSC. Resumption of activities in Turkmenistan, mobile communication operator in Kyrgyzstan. connecting approximately 1 million subscribers Approval of new revision of MTS dividend policy by the end of the year. Signing of indicative offer with MTS Bank and JSFC Sistema on acquisition of 25.095% of the authorized capital in MTS-Bank OJSC. Suspension of operation in Uzbekistan

2005 2004 2003

Expansion in CIS and launch of Expansion in CIS and launch of Expansion in CIS and launch of operation in Belarus operation in Belarus operation in Belarus

2000 2001 2002

IPO at NYSE exceeded USD 350 million for In August the Company’s Expansion in CIS and launch funding the expansion in Russia and CIS subscriber base exceeded of operation in Belarus countries 2 million users

2015 Sustainable Development Report 13 G4-6 G4-8 GRI-PA4 1.2. Our Markets

Republic of Belarus Company Mobile TeleSystems msPJSC

Share of ownership, % 49

Brand MTS

Population, mln 9.5

Subscriber base 5.3 by the end of 2015, mln

Mobile penetration, % >100

Market share, % 46.7

Ukraine Company MTS Ukraine PJSC

Share of ownership, % 100

Brand Vodafone Population, mln 42.5 Republic of Armenia Subscriber base 20.4 Company K-Telecom CJSC by the end of 2015, mln

Mobile penetration, % 132 Share of ownership, % 100

Market share, % 36.2 Brand VivaCell-MTS Population, mln 3.0

Subscriber base 2.1 by the end of 2015, mln

Mobile penetration, % >100

Market share, % 59

14 1.2. Our Markets Russia Company MTS Russia

Share of ownership, % 100

Brand MTS

Population, mln 146.5

Subscriber base 77.3 by the end of 2015, mln

Mobile penetration, % 175

Market share, % 30

Turkmenistan Company MTS Turkmenistan ES

Share of ownership, % 50.01

Brand MTS Republic of Uzbekistan Population, mln 5.0 Company Universal Subscriber base 1.6 Mobile Systems by the end of 2015, mln

Share of ownership, % 50.01 Mobile penetration, % >100

Brand UMS Market share, % 33.9 Population, mln 31.6

Subscriber base 1.1 by the end of 2015, mln

Mobile penetration, % 65

Market share, % 5.4

2015 Sustainable Development Report 15 Overview of the economic situation and market development

In Russia mobile communication services are rendered by four Mobile Internet is gaining momentum in the mobile markets of federal operators: MTS PJSC, MegaFon PJSC, VimpelCom PJSC and Russia and the CIS countries. The basis for the qualitative growth RT-Mobile CJSC (T2RTK Holding, a joint venture of Rostelecom in consumption of mobile Internet services is the development of PJSC and Tele2), as well as regional telecommunication compa- 3G and 4G (LTE) networks. nies operating in different standards for cellular communication: GSM, NMT 450 and CDMA –1x, UMTS (3G). The MTS’s 3G network covers all federal districts of Russia, Armenia, Belarus, Turkmenistan and Ukraine. In Russia, our The average MOU (Minutes of Usage) of voice com- revenue from mobile Internet grew by 20% in 2015; the number munication in the MTS network continued to grow in of regular users of our data transfer services was also increasing 2015 and reached 381 minutes per month. and accounted for more than 47% by the end of 2015. The level of data transfer traffic consumption by mobile Internet users increased by 1.4 as compared to 2014. At year-end 2015, the level of mobile penetration exceeded 175% securing the position of Russia among the most advanced tele- In 2015, commercial LTE networks were launched in all host communication markets in the world. Being one of the leading regions. MTS was the first Russian telecom operator to provide players in the telecommunication markets of Russia and the CIS, international roaming access to LTE networks. LTE penetration MTS aspires to use the existing growth potential for all most among mobile Internet users in 2015 doubled in comparison dynamic industry segments. with 2014.

The shares of the Russian market mobile operators by the number of subscribers in 20151

Other 1% 30%

15%

30% 24%

1 According to AC&M agency.

16 1.2. Our Markets Global trends in the telecommunications sector

A fundamental challenge faced by telecom operators now and in growing consumption of services by the existing subscribers, the future is the ongoing explosive growth of data transfer volu not only ensure additional revenue to operators (to some extent mes in mobile networks. Even by the most pessimistic forecasts, compensating for the fall in the segment of voice calls and short the pace of such growth in both well-developed and still develop- message service), but, above all, make them face the problem of ing markets will not fall below dozens per cent per annum over cost-efficient mobile network capacity build-up. the next five years. High penetration of smartphones, as well as

Technology trends

Growth of LTE-networks coverage, redistribution of frequency for the operators. The industry is interested in the development resources for LTE (“refarming”), consistent implementation of and implementation of new technologies, which both help to Carrier Aggregation and VoLTE functions both by operators and cope with the traffic growth and are able to provide a reasonable manufacturers of smartphones – all these areas intelligible to return on investment to support such growth. subscribers have already gained momentum and are routine

Trends in related areas

Most of the growth accounts for the markets where the telecom For more information about the MTS Group, its position is a source of Internet connection; however, the telecom opera in the industry, as well as market forecasts for 2016 and tors not necessarily are the primary beneficiary of the innova- medium-term period please refer to the section “Our tions that take place. markets” of our 2015 Annual Report.

Hence, the number of new services based on existing mobile communication networks continues to grow. Also, the emergence of fundamentally new 5G-based products and business ecosys- tems is expected.

2015 Sustainable Development Report 17 G4-4 1.3. Business Model

Assets Portfolio of MTS services

Network infrastructure Mobile communications

Frequencies and licenses Landline communications

Retail chain Fee-based TV

Strong brand Telephones and smartphones

Strong employees Financial Services

Competences and procedures IT Services

MTS as a totality of interrelated assets creates and promotes portfolio of MTS services provided to various groups of clients for a fee that combines into MTS revenues used for operational and capital expenses, social projects, tax payments and dividends for shareholders.

18 1.3. Business Model Groups of clients Revenues

Mass segment of mobile communications

Home users

Corporate customers

Operational Social Tax Dividends and capital Projects payments expenses

State Society Shareholders of MTS

2015 Sustainable Development Report 19 1.4. CSR Strategy

MTS provides telecommunications services to more than 100 million subscribers in Russia and the CIS, Eastern and Central Europe. We are working in the telecommunications industry which is strategic for the country development and indispensable for resolving a wide range of everyday and business tasks of any person.

Our current policy in the area of corporate social responsibility • contribute to sustainable development, better health, and is closely integrated with a business strategy which is based on growth of social well-being; three “D”: Data, Differentiation, Dividends. • cope with expectations of stakeholders; Our technologies, pricing policy and communication quality affect the quality of life of many people. We are fully aware • comply with applicable laws and the international codes of of our huge responsibility for assuring a better future for next conduct; generations on the basis of sustainable development. This is the top challenge of our time, which requires intense everyday work • contribute to the transparency of the Group and the improve- to solve. ment of its governance system.

One of MTS main principles is the integration of corporate social We strictly adhere to our CSR policy. MTS’s strategy in the area of responsibility (CSR) with all aspects of the Group’s activities. In social responsibility is based on ongoing analysis of our current order to comply with the CSR principles, the Company’s business business processes, their compliance with the principles of has to: socially responsible business, our ability to conceive and carry out projects that go beyond the boundaries of the legally defined • meet today’s needs; minimum and focus on increasing the positive impact of our business on society. • not compromise the ability of future generations to satisfy their needs; We are consistently working towards more efficient social policy. For that purpose, we carefully study and implement the best Rus-

“We believe that there is no sense in strategy changing during challenging times, because it will evidence that we did our business wrong in less challenging times, in the times of a healthier economy, and were not ready for changes. Experience has proven that we have always been ready for hard times and actually show that we are able to outperform the market even in a period challenging for the economy.”

Andrey Dubovskov, MTS PJSC President

20 1.4. CSR Strategy sian and international CSR and charity practices and closely work holders, and more broadly – to enrich the lives of people, to pro- with various expert and investment communities. vide new opportunities for living, business and self-fulfillment. We are sure that implementation of our 3D Strategy will allow us For us, sustainable development means a system of consistent to maintain and strengthen the market position, ensure financial economic, environmental, and social activities carried out in the stability and operating efficiency, guarantee the development context of continuous cooperation with stakeholders, and aimed and growth in the most dynamic segments, as well as will enable at more effective risk management and long-term improvement us to offer our subscribers the best experience and to fulfil our of the image and reputation of the MTS Group, as well as at an obligations to the shareholders. increase in capitalization and competitiveness. For more information on MTS business strategy, results Strategically, MTS primarily positions itself as a telecommunica- of its implementation in 2015, forecasts and their actual tion company, the all-purpose communication service provider, implementation see section “Our Strategy” of our 2015 offering a full range of high-quality services, absolute and undis- Annual Report. puted leader in the mobile segment. Telecommunications is our key competence and core business. At the same time we have Please refer to section “Social Responsibility” at our official web- gained intellectual, organizational and management capacity to site www.company.mts.ru/comp/social_responsibility to obtain be used as a basis to seek points of growth in adjacent markets MTS’s sustainable development reports dated back as far as 2008, that will allow us to create more value for our clients and share- as well as our major CSR projects.

3D strategy Business strategy CSR strategy

Data Completion of MTS transformation Working with talented young people, designers and The main source of growth for the into a data company young scientists telecommunication services market. Competitive development of 3G and Search for and support of innovative projects in the LTE networks area of ICT and telecommunications focused on Consolidation of frequency resourc- advanced development of the telecommunication es suitable for development of LTE industry of the country networks Popularization of state-of-the-art Internet technologies for raising the comfort level of social life

Differentiation Fixed business Provision of high-quality, innovative and available Diversifying our service portfolio, Financial services products and communication services and financial services to all consumers thus mitigating the industry risks Internet of Things (IoT) and strengthening the competitive Promotion of equal opportunities by providing equal Satellite TV position. access to advanced technologies, innovative products Big Data and services, implementing projects that stimulate System integration self-fulfillment Cloud services Mobile devices

Dividends Assurance of high profitability for Introduction of the best practices in the field of CSR, Ongoing and consistent rise of busi- the shareholders Standardization of CSR processes for conformance ness efficiency, based on the use of Continuous improvement of invest- with international requirements, best technological and organiza- ment and operational efficiency Creation of a transparent environment for sharehold- tional solutions, costs monitoring, Maintenance of the best possible ers and potential investors, carefully considered investment level of debt and its value Bolstering the corporate spirit and reputation of MTS. policy and improvement of business processes

2015 Sustainable Development Report 21 CSR Principles

Responsible business practices gies, innovative products and services that foster self-fulfillment of an individual. MTS follows the principle of responsible business conduct. The company plans and arranges its operations in a way that con- In 2015, the Company continued implementing Internet access tributes to positive changes in society, improves social climate, and TV services in all regions of Russia and increasing the rate of relieves social tension and stimulates the development of society. Internet access. MTS understands the social responsibility as pro-active attitude and doable assistance to society, the state and particular indivi duals in the areas where the Company can help. Innovation

Our key principle of responsible business is a total ban of We believe that quality of life can be improved by widespread commercial bribery of public officials, as well as the financing of implementing of advanced technologies, products and services. political parties, organizations, movements and associations. MTS Diffusion of innovations and their penetration of our everyday does not participate in CSR projects that involve direct or indirect life foster innovative thinking, which in turn stimulates the devel- influencing of the decision-making process or compensating opment of society, promotes economic growth and facilitates the state officials, members of local self-government or other officials integration of our country into the world community. for decisions they make. We are not involved in any projects that benefit political parties, organizations, movements and asso- For more information about our innovations refer to ciations. We also do not participate in charitable projects that Section 2.2 “Innovative products and services”. involve state-owned companies or public officials if such projects are of confidential nature and, if disclosed, may be harmful to the Company or its employees. Encouraging economic growth and a prosperous society

Responsibility of a mobile operator MTS endeavors to contribute as much as possible to the economic development of the host countries, in particular, their remote The main objective of MTS is to provide high-quality, innovative regions. That is why our growth strategy is based on substantial and available products and communication services and financial investments in the creation and development of telecommu- services to all its consumers. As a communication service provid- nications infrastructure. We work to strengthen the high-tech er, we are responsible for providing high-quality and fairly priced segment of economy and to make the country more attractive services, expanding the coverage and capacity of our network to investors. MTS supports initiatives of the government focused and developing new affordable and socially significant telecom- on improving the quality of life and the well-being of society and munication technologies. In addition, MTS continuously improves individuals and assists the state in implementing these initiatives. its communication services and the quality of client service, implements loyalty programs and launches new, more attractive For more information about our innovations refer to tariff rates for mobile and fixed communication services, access Section 3 “MTS and society”. to Internet and commercial TV channels.

For more information about our innovations refer to Responsibility to the state G4-SPM Section 2 “For the Benefit of Clients”. The state is getting additional funds through our higher tax deductions to various-level budgets; our contractors benefit from Equal opportunities the growing number of our orders for goods and services; capital providers derive profit from the growth of financing of our invest- One of the major challenges of the today’s Russian society is its ment programs. MTS activities yield considerable financial effect digital inequality. Insufficient coverage by the Internet and state- with a very wide range of beneficiaries. of-the-art communication services, especially in remote regions, impedes innovation and hampers dynamic development of the The activities of MTS in all operation markets strictly comply with country. MTS makes its doable contribution to creating equal existing laws, in particular in the area of taxation and financial opportunities by providing equal access to advanced technolo- control, sanitary and epidemiological norms, labor laws and the applicable anti-corruption laws.

22 1.4. CSR Strategy For more information about our innovations refer to The main channel for the dissemination of information on social Section 3.2 “Cooperation with the state”, 5.4 “Compliance performance of MTS is the publication of our annual social and business ethics”. reports. Our non-financial reporting complies with international norms and is subject to the procedure of public endorsement.

Social investments For more information about our innovations refer to Sec- tion 1.6 “Stakeholder engagement” and 5.6 “Disclosure We believe our social investments to be a long-term contribution of information”. that not only encourages the development of society, but also serves as a basis for sustainable development of our Company. MTS is committed to ensuring that our business contributes to Charity the socio-economic prosperity of the regions of Russia and the host countries. We create for our clients new avenues for com- No truly successful business can disregard those who need help, munication, development, labor and creativity, enrich their lives so MTS allocates a part of income for financing of CSR and charity and make them truly multifaceted. projects.

For more information about our innovations refer to Charitable activities of MTS are an offshoot of our business strate- Section 3.1 “Social programs”. gy. A priority strategic line of our charitable activities is helping severely-ill children disregarded by the state as well as rendering support to families who cannot afford paying for costly medical Drive for results treatment. In order to maximally promote the charity process, MTS have developed a simple and convenient service. Our sub- A key principle of MTS’s social policy is the focus on doable scribers transfer funds to help a sick child by sending a respective and measurable results. This means that we pursue the policy SMS to *700#. of well-reasoned social investments with foreseeable results in order to resolve the most pressing social problems for the benefit MTS also supports projects focused on the education as well of society as a whole. as cultural and creative development of children. The key MTS Generation M project combines the ideas of creativity and charity and is held under the motto Creativity for Life. All actions on the Transparency site and in social media communities assist raising funds to help sick children. We believe the ongoing dialogue with the stakeholders to be a necessary condition for efficient social performance. We inform For more information about our charity activities, refer to the public about our activities in accordance with the laws of Section 3 “MTS and society”. Russia and international norms applicable to public companies.

2015 Sustainable Development Report 23 CSR and Charity Management

The Board of Directors and the Management Board of MTS are the main authority to control our CSR activities. These competencies include approval of the CSR strategy and social programs, supervising the implementation of these, and evaluating performance of social projects. The planning, implementation and consolidation of CSR activities are the responsibility of the Vice-President for Human Resources and the Department of Corporate Social Responsibility which is a part of our HR unit. The planning, implementation and consolidation of our charitable activities are the responsibility of the Public Relations Department. Our social and charitable initiatives in the regions are planned and implemented by employees of the Department of Human Resources, Marketing and PR who are appointed by directors of macro-regions.

CSR Committee

A special CSR committee was established within the office of MTS • independent audit of the Sustainable Development Report President. It is an advisory body participated by representatives of the departments of CSR, marketing, sales and service, security, • approval of annual work plans of the Corporate Center and procurements, public relations and compliance, as well as part- the macro-regions ners and recognized CSR experts.

The tasks of CSR Committee:

• attraction of partner’s programs

• broadcasting our CSR policy within and outside of MTS

• creating CSR environment inside and around of MTS

• consolidation and efficient use of Company’s resources in integrated CSR projects

Uzbekistan

In 2015, Universal Mobile Systems LLC adopted the The priority lines of CSR activities of UMS LLC are: regulatory framework for implementing charitable projects as follows: • Innovations

• UMS Activities in the Field of Corporate Social • Internet Responsibility (CSR) Policy • Integration into society • UMS Activities in the Field of Charity Policy • Eco telecommunications • Charitable Projects Management Regulations.

24 1.4. CSR Strategy “Based on the results of self-assessment MTS states its intention to fully and consistently implement this standard.

The self-assessment which was held in accordance with respective methods issued by the Russian Union of Industrialists and Entrepreneurs (RUIE) also showed that the company has potential for further development across a number of subjects of the standard. Therefore, the Company will launch a dedicated program of social responsibility development based on ISO 26000, and will conduct self-assessments based on this standard at least once every three years.

MTS is responsible for its actions - this is where we see the key to sustainable development of our company.

We believe that this self-assessment will strengthen the business of MTS, in particular in the area of corporate social responsibility.”

Andrey Dubovskov, MTS PJSC President

Assessment of our CSR system

In 2015, MTS conducted a self-assessment of its operations in Principles of social responsibility in accordance with ISO 26000: accordance with the principles of social responsibility as set out in ISO 26000:2010 Guidance on Social Responsibility1. The official • Accountability website of MTS PJSC published a statement by the Company Pres- ident Andrey Dubovskov concerning the use of ISO 26000:2010 • Transparency Guidance on Social Responsibility www.company.mts.ru/comp/ social_responsibility/strategy. • Ethical behaviour

International Standard ISO 26000 provides guidance on the un- • Respect for stakeholder interests derlying principles of social responsibility, the core subjects and issues pertaining to social responsibility and on ways to integrate • Respect for the rule of law socially responsible behavior into existing organizational strate- gies, systems, practices and processes • Respect for international norms of behaviour

• Respect for human rights

1 In March 2013, the corresponding Russian standard GOST R ISO 26000 was approved.

2015 Sustainable Development Report 25 Outcomes of implementing our CSR strategy

2015 Target Actual

Upgrade to the state-of-the-art high-quality non-financial reporting. The use of GRI G4 standard will allow focusing + our SDR report on material aspects of MTS sustainable development.

Intensify the use of the social and educational mechanisms to promote and advance the use of mobile Internet in + the society.

Continue replicating our key CSR projects "Telecom Idea", "Network for All Ages", and "Kids on the Internet" in the + host regions and countries.

Intensify the implementation of the Just Give Good! charity program and the Generation M all-Russian charity + project of developing children's creativity and helping critically ill children.

Continue developing the Social HR aspect: expand the opportunities of internship, work practice and hiring for + persons with disabilities; increase the involvement of our employees in socially significant activities aimed to foster the integration of young persons with disabilities in society.

Continue working on the "Eco-telecom" project: promote environmentally responsible lifestyle and attitudes + towards the environment, provide support to federal and international eco-activities.

Continue implementing ISO 26000:2010 Guidance on Social Responsibility. +

Improve the quality of CSR projects management by engaging the CSR Committee established in 2014. +

2016 Plans

1. Revise the existing CSR policy to incorporate the 2. Based on the results of self-assessment it was seven core subjects of ISO 26000: decided to continue improving the MTS activities in the field of CSR and sustainable development follow- • Organizational governance ing the ISO 26000 guidelines and to implement an • Human rights appropriate set of measures. Assess the extent of use of the standard at least once every three years.1 • Labor practices

• Environment

• Fair operating practices

• Client and consumer issues

• Community involvement and development

1 www.company.mts.ru/comp/social_responsibility/strategy

26 1.4. CSR Strategy 1.5. Corporate Values

MTS has adopted the SIMPLE corporate values. SIMPLE are six core G4-56 values shared by every MTS employee. We believe these values to be critical for our everyday business.

Partnership is SIMPLE, S if you can work in a team

Efficiency is SIMPLE, I if you reach the set targets

Responsibility is SIMPLE, M if you take responsibility for your actions

Courage is SIMPLE, P if you take the first step forward

Creativity is SIMPLE, L if you think outside the box

Openness is SIMPLE, E if you can listen and hear

2015 Sustainable Development Report 27 Online media

Our MTS/Media portal www.media.mts.ru encom- mobile internet and internet-based services, as well as passes a variety of technologies for life. It covers those who seek a deeper understanding of the high- consumer-oriented subjects in the area of high tech tech and gadgets. MTS/Media takes on the function mixed with elements of fun and learning. MTS/Media of education, as well as creation and systematization presents news, events and scientific developments of content, which helps our clients to face everyday as well as the latest gadgets and mobile Internet issues — from making the public transport more easy products. The target audience of reviews, tests, and to use to creating a safe internet-environment for your articles are newcomers to the world of smartphones, kids at home.

The RegiON company-wide contest

The RegiON company-wide contest, which is in its 4th year, brings together all MTS employees and encourages building a corporate culture appropriate to an integrated operator.

The first contest was held in 2012 and became one of the highlights of MTS corporate life; every year it attracts more and more our employees. During the past years we held 4,000+ events and chose 1500 finalists. The total number of participants reached 90,000.

The contest encompasses several phases, which can be differently focused depending on the contest subject of a particular year. The contests of 2014 and 2015 had three phases; however, the teams were strictly limited by the number of events. It should work performance, and lots of other useful and fascinating have been no more than three in each phase - one event for “Em- information. ployee value”, “Business objectives in macro‑regions/regions”, and “Client” subjects, respectively. In 2015 appeared eleven issues of Zaprosto and a special Success Stories issue that focuses on the most interesting career rotations The winners in the team & individual competition participate in within the Company. a final outdoor event that involves adventure, exciting new tasks, as well as an informal meeting with the top managers of the MTS The magazine is available in several formats: first, a legacy Group. printed one, second, an electronic issue accessible to employees through our internal portal, and, third, a special mobile app for One hundred teams from various regions of Russia, as well as tablets and smartphones. twelve teams from Ukraine, three from Belarus, thirteen of Arme- nian and five from Turkmenistan took part in the RegiON-2015 contest. There were over 22,000 participants; nearly 1,000 events Internet portal were held within the contest. MTS maintains a universal information portal, which is the key information source to our employees. It hosts all Company news, Zaprosto magazine regulatory and reference documents, and search tools. By using it, you can translate documents, call a company car, book confe Our corporate monthly magazine Zaprosto (No Problem!) rence-calls and meeting rooms, plan your vacation, order office highlights the most interesting and important events in the stationery, participate in internet forums, and read the Easily life of MTS: new developments and projects, important chan corporate magazine. The portal provides links to any additional ges and appointments, regional news, services, products, pri resources: e-learning and e-testing system, performance manage- ces, and promotional campaigns. It offers interviews with top ment, personal accounts of our employees, internet library, and managers of MTS, interesting client stories, tips to improve more.

28 1.5. Corporate Values Radio broadcasting In 2015, 257 MTS employees were recognized with departmental awards by the Ministry of Communications and Mass Media of The Company broadcasts its own Just MTS Radio accessible to the Russian Federation. all MTS employees in Russia. It offers key corporate news of the MTS Group; separate subjects cover statements by top managers Awards by the Ministry of Communications and Mass Media of and opinions of MTS experts. Competitions are held at regular the Russian Federation intervals; the winners are awarded prizes at our radio studio. MTS radio is available 24/7 with 30% of air time being information and the other 70% left to the music. In 2015, our corporate Award Employees awarded radio held the first international vocal competition “The Voices of MTS”; also, the Company’s anthem has been recorded. Commendation 48

Master of Communications title 85 MTS Life social network Certificate of Merit 55 Social networking allows our employees to share any idea with colleagues or ask them questions, get their feedback, participate Honorary Radio Operator title 67 in discussions, create own group, or run a vote. Total 257

Recognition program

The Company runs a single program of recognition of the Events achievements and encouraging the skills development of its employees. At the federal level, this program has the function of MTS cares about making interaction of its employees not only identifying and highlighting the achievements of both individuals efficient and useful for business development, but also interest- and employee teams and choosing the best ones. ing. We regularly run events focused on team building, sports, training and creative development of our employees and their Outcomes of the federal recognition programs in 2015 families.

Every year, MTS Group holds regional and federal sports tour- Recognition program Number of Number of naments, in order to find the best athletes eligible for the JSFC applications winners and Sistema’s Summer Games. For 13 years, MTS have taken part in participants the Games and usually win prizes.

Professional of the Year 358 26

Manager of the Year 84 15

Well done! 68 4 teams

Our team 74 3 In April 2015, we opened the Creative Heart LSC (Local Switching 9 1 Center) Corporate Theatre staffed exclusively by our employees who have attended a drama school and attended classes in acting, singing and choreog- The winners have received commemorative badges and valuable raphy. On October 28, a premiere of the Venetian prizes in Moscow at an awards ceremony. They have been con- comedy Truffaldino was performed by actors of gratulated by the MTS President. The recognition programs are the MTS corporate theatre in honour of the Com- supported by a wide media campaign; information on achieve- pany’s anniversary. ments of employees is posted in all MTS offices.

2015 Sustainable Development Report 29 G4-24 G4-25 1.6. Stakeholder G4-26 Engagement

MTS recognizes its responsibility towards all stakeholders: shareholders and investors, employees, clients, partners and contractors, government authorities and local communities. The company aims to understand the needs and expectations of each one of them. When engaging with these groups, we strive to comply with the balance of interests, and build dialogue and cooperation based on mutual respect, partnership and fairness. We seek to build on our stakeholder engagement and keep it at a high level. We have ongoing dialogue with stakeholders and provide all the information about our social activities.

30 1.6. Stakeholder Engagement Stakeholders Significance for us Stakeholder interests Methods of engagement Further group details

Clients We respect and value our clients and • Cost of service Most of our communications are via con- Section 2. believe the progress of our business in tact centers and the Internet. By calling For the • Quality of service today’s highly competitive environ- the contact center, any of our subscrib- Benefit of ment to be possible only if the highest • Easier engagement ers is able to obtain detailed information Clients quality of our goods and services is with the Company about MTS services, new tariffs, and secured. provide feedback on the quality of • Privacy of personal data We seek to improve the quality of connection, client service, etc. We also service and make the interactions with conduct special surveys to assess client clients more easy, in particular, by satisfaction. Any MTS client can easily deploying new methods of connecting provide feedback on the quality of our services and paying for them, as well services by sending an e-mail to our as by launching new services. website en.mts.ru. We also give great attention to ensuring security and privacy of personal data, fighting fraudulent SMS messages, respecting content copyrights, as well as running responsible marketing campaigns.

Shareholders MTS is a joint-stock company, there- • Financial results Our Department for Corporate Financ- Section 5. and fore our main goal is to ensure the es and Investor Relations is the main Respon- • Dividend policy investors growth of business value and optimize link to connect the Company and its sible the return on investment to our share- • Risks and opportunities investors. We use various formats for Business holders. We also strive to ensure the direct communication with our investors • Efficient governance highest level of information disclosure and shareholders in all major financial to give our shareholders a true and • Transparency centers around the world, regularly fair view of the state of affairs of the publish information on our financial • Long-term sustainability company. results and key corporate events, as well We adhere to the highest standards as analyze the opinion of investors and of corporate governance and build up shareholders on the Company business. efficient communication between all Any shareholder or investor can ask a parties involved in this process. question or express a wish by contacting the Department for Investor Relations. All relevant information about MTS activities is publicly available on our website in the Investor Relations section www. mtsgsm.com/information/stock.

Employees Human resources are our main value. • Career opportunities We have provided to our employees a Section 4. Caring for employees is one of our key number of ways to efficiently commu- For the • Remuneration and priorities on which the success of our nicate with the Company by addressing Benefit of social guarantees business in today’s market depends. its management, expressing opinions Employ- We are constantly improving the • Skills development on MTS development prospects and ees following aspects of social and labor opportunities plans, submitting proposals on how to relations: occupational safety and optimize existing business processes and • Volunteering health, social support, carrier opportu- services, or implement new ones. nities, and personal self-fulfillment. We regularly carry out sociological studies to evaluate the Company’s moral climate. These studies allow us to verify our HR strategy and tactics against actual expectations of employees.

2015 Sustainable Development Report 31 Stakeholders Significance for us Stakeholder interests Methods of engagement Further group details

Local MTS operates in all regions of Russia, • Creating new jobs MTS is actively engaged with local Section 3. communities CIS and foreign countries. communities (population, public For the • Investments in commu- We are committed to long-term and organizations and associations, health Benefit of nities sustainable development, which com- authorities, trade unions and the media) Society bines successful business with human • Charity of the host regions. values and national development • Educational and cultural priorities. programs, • Volunteering

Authorities We are confident that the develop- • Socio-economic growth We actively participate in the work of re- Section 3. ment of the Russian economy and gional consultative bodies and working For the • Consumer protection the implementation of nation-wide groups. This helps us better understand Benefit of projects need concerted efforts of • Creating new jobs the expectations of the state and be its Society the government and the business reliable partner. • Tax deductions community. We are caring for the social and economic development of the host regions, knowing that high performance in this area is a key factor contributing to our successful business in the long run.

Business We strive to build long-term rela- • Transparent procure- Our procurements processes adhere Section 5. partners and tionships with our business partners. ments to a special policy developed by the Respon- contractors Effective engagement with them helps Company to comply with regulatory sible • Long-term sustainability MTS to use new market opportuni- requirements. This policy ensures the Business ties, provide better quality of client efficient use of funds, increases the com- service and improve our technologies. petition and makes us more transparent. The transparency of relations with The equal access to the procurement suppliers and partners, especially in procedure is ensured by preemptively the field of procurements, is a most using equal competitive opportunities critical aspect of our corporate social and unified rules for all participants of responsibility. the procedure. Every year, we conduct a Voice of Suppli- er opinion poll. As a part of our anti-corruption policy, we conduct trainings and certification of MTS contractors on topics relating to the applicable anti-corruption laws.

32 1.6. Stakeholder Engagement Engagement with Stakeholders while Preparing this Report

While preparing this 2015 Sustainable Development Report we opment Draft Report. Representatives of internal and external conducted a questionnaire survey of internal and external stake- stakeholders were invited to discuss the report concept. Prior to holders with the purpose of identifying material aspects of MTS the session, the participants of the discussion received printed sustainable development in order to clarify and update the map copies of MTS Group 2014 Sustainable Development Report and a of material aspects. presentation illustrating the concept of the 2015 Sustainable De- velopment Report. The concept was presented to the attendees, For more details of this survey, see the section About this then they were invited to comment and ask questions in respect report. of the report. The stakeholders had made a number of comments and proposals on presentation of information in the report, On April 21, 2016, an extended session of the CSR Committee which were incorporated in the report (see the table Comments was held to discuss the concept of our 2015 Sustainable Devel- by stakeholders in About this report).

2015 Sustainable Development Report 33 MTS 2. for the Benefit of Clients

2.1. Telecommunication Infrastructure...... 38 2.2. Innovative Services...... 43 2.3. Quality of Service...... 50 2.4. Availability and Security of Services...... 53 2.5. Customer privacy...... 58

MTS was awarded Travellers’ Choice 2015 in the Trip Communication Operator category, according to the Russian users of TripAdvisor, the world’s biggest travel site

G4-ЕС8

G4-DMA Today MTS continues to maintain the lead in development and implementation of innovative, socially significant technologies in Russia. Information technologies and telecommunications make the information and knowledge commonly available, thus acting as the major drivers of information society development. Along with development of technologies and implementation of innovations, expansion of the telecommunication infrastructure promotes technological development of society, improves the quality of life, enhances capabilities of people, ad contribute to the country’s economic growth.

+3.6%

In 2015, the number of MTS Russian mobile subscribers increased by 3.6% 77.3 mln subscribers

36 1.6. Stakeholder Engagement MTS Group’s Key Services G4-4

Mobile communications Fixed-line communication

Retail chain Home Internet and TV

System integration Security, video surveillance

М2М Financial services

E-commerce Internet shop

2015 Sustainable Development Report 37 2.1. Telecommunication Infrastructure

Telecommunication infrastructure development continues to be the primary component of MTS’ strategy. It is an essential condition of development of the Company’s business and of fulfillment of its social responsibilities.

The coverage of the major Russian mobile operators generally • deploy the LTE network remains to be similar. The subscriber’s choice of a telecommunication company is more and more often influenced by the • develop the transport network to deliver the transmission quality of the services provided, data speed, extent of coverage, speeds necessary for mobile broadband access and fixed-line and service prices, so development of high-speed wireless data business networks and the associated backbone infrastructure will be out key task for the years immediately ahead. 2016 targets:

Main lines of infrastructure development strategy in 2015: • launch Voice over LTE

• accelerate 3G base station construction to extend the cover- • expand SON age and increase the capacity of the network • enhance investment performance • enhance the quality of the existing GSM and UMTS networks

Expansion and Upgrade of Mobile Communication Infrastructure G4-ЕС7 As in the previous years, MTS keeps expanding the mobile communication infrastructure and continues building base stations in accordance with the target plan. We strive to maximize the mobile communication coverage in the countries and regions of MTS presence to cover the needs of our clients and take an integrated approach to data network development: while actively developing 4G networks, we continue investing into 3G network infrastructure development.

The networks of the second and third generations cover 98% of We kept upgrading the 2G and 3G networks all over the country the populated area of Russia. Belushiya Guba, Novaya Zemlya, is in 2015 just as we did it in the previous periods. the northernmost point, Lavrentiya Settlement, Chukotka, is the easternmost point, Baltiysk, Kaliningrad Region, is the western- most point and Mikrakh Village, Dagestan, is the southernmost point where the MTS network is operating.

38 2.1. Telecommunication Infrastructure Development of LTE (4G) networks

The ongoing mobile Internet expansion becomes increasingly important for the mobile communication markets in Russia and the CIS countries. While it is 3G network development that continues to be the basis for tangible growth of the level of consumption of mobile communication services, it is the LTE technology that is given the primary role in digital service development and that makes it possible to serve even the most demanding clients at the qualitatively new level.

The LTE network makes it possible to comfortably watch LTE carrier aggregation (LTE 1800+2600) is implemented step high-definition streaming video, remotely handle “bulky” files, by step to achieve high speeds for the users. It has been already and participate in webinars and videoconferences, which require done at 2901 base stations in 18 regions. high speeds, impeccable connections and much more. The transition to 4G will enable us to increase the wireless data transmis- MTS is aggressively expanding the capacity of the LTE and 3G sion speed up to 1 Gbit/s for fixed-line communication and up to networks, paying special attention to places of high concentra- 100 Mbit/s for data exchange with mobile access gadgets. tion of people. Furthermore, to improve communication at hot spots (traffic jams, malls, etc.), the Company launched a project In 2015, MTS continued expanding the LTE network; as of the end focused on deploying an outdoor small-cell network and compre- of the year, it has been launched in all 83 regions of Russia. The hensive indoor solutions. MTS combines implementation of these LTE network was built in the 800, 1800 and 2600 MHz bands. The solutions with construction of standard base stations to enhance priority was given to LTE 1800 (56% of the total number of new coverage and deliver premium servicing. We doubled the capa LTE base stations). Aggregating several banks makes it possible to city of the LTE network at the principal Moscow railway terminals increase the mobile Internet speed and optimize network perfor- and considerably improved indoor and outdoor coverage at the mance by combining broad coverage with high capacity. airports at the beginning of the year. As a result, the capacity of the network at the key transport sites has nearly doubled and the To develop the LTE 1800, frequencies are refarmed1 from 2G to speed has increased by one third. LTE (the refarming band width varies from 5 to 15 MHz from region to region), the voice traffic is transferred from 2G to 3G and the data traffic is transferred from 3G to LTE.

1 Frequency refarming is the procedure of replacement of the radio technology used at the radio frequencies assigned to the telecom operator.

Joint Operation of LTE Networks

In December 2015, MTS PJSC and VimpelCom PJSC Russia assume that in 2014–2016 MTS will build jointly signed a supplementary agreement to the existing operated networks in 19 regions and VimpelCom will 2014 contract on provision of comprehensive services build them in 17 regions of the country. in the sphere of planning, joint development and ope ration of LTE communication networks. The companies The agreement is for a period of seven years when the started integrating their 10 MHz bandwidths in 20 con- operators will provide each other with base stations, stituent entities of Russia: the Vologda, Kaliningrad, sites, their infrastructures and transportation network Kaluga, Murmansk, Nizhny Novgorod, Omsk, Oren- resources in these regions. At the same time, both burg, Oryol, Pskov, Sakhalin, Tula, Yaroslavl Regions, operators will be allowed to build networks on their the Republics of Altai, Kabardino-Balkaria, Karachaye- own to expand individual LTE coverage. The operation vo-Cherkessia, Mordovia, Ingushetia, Chuvashia, the will be a Russia-unique precedent of joint use of active Chechen Republic and the Khabarovsk Territory. network infrastructure, which will make it possible to bring high-speed mobile Internet not only to large The plans for large-scale partnership in joint deploy- cities, but also to small populated areas. ment and operation of LTE networks in 36 regions of

2015 Sustainable Development Report 39 SON artificial intelligence

The acronym stands for Self-Organized/Optimized Network. They or that segment and, most importantly, to adapt the network to are smart networks which can themselves assess the quality of the peak loads, massive events and migrating traffic. functioning of each of their components and optimize their performance. The SON is made up of several modules, one module In February 2014, the SON was tested in the process of main- optimizing the neighboring cells, the second one optimizing the taining proper Sochi network performance during the winter coverage, the third one optimizing the parameters and the fourth Olympics. Starting from September 2015, the SON technology one doing dynamic load distribution and the fifth one being was implemented in Moscow and the near parts of the Moscow responsible for automatic system recovery. These modules make Region. The SON makes it possible to improve not only voice it possible to abandon occasional manual network tuning by en- communication, but also high-speed data transmission. Self-op- gineers and introduce regular automatic network optimization. timized networks make mobile Internet faster and more stable The SON artificial intelligence is ready to simultaneously handle a even in the places of high concentration of users and in the peak number of important tasks – to intelligently change the network load hours. parameters, effectively manage the network capacity and coverage, tune the network behavior to suit the varying needs of this

Automated Multi-standard Response to the challenges LTE Coverage and high transmission of evolving network rates for all subscribers 3G Multi-level 2G Multi-band Higher transmission rates and Efficient increase of capacity elimination of the MF band to cope with traffic growth advantage SON 800 Macro 900 1800 Micro 2100 2600

Automated 3D Network

40 2.1. Telecommunication Infrastructure Satellite TV

In 2015, MTS presented its new product – interactive satellite TV, which makes it possible not only to watch HD channels, but also access the Internet via a LTE/3G or fixed-line network and use unique services based on convergence of satellite, mobile and fixed- line communication.

MTS offers 130 unique TV channels, of which 30 channels deliver HD quality. It is possible to connect both to “conventional” satellite TV and hybrid interactive TV incorporating an Internet channel.

Fixed broadband access and cable television

MTS is one of the major Russian companies providing broadband access (BBA) and cable television services. MTS continues to systematically pursue the strategy of improving the quality of its fixed-line products by upgrading our networks, launching digital and interactive TV services, increasing the throughput performance of our backbone channels to increase speeds for the subscribers.

As of the end of 2015, the subscriber base of the MTS fixed-line Unblocking the BBA networks and enhancing their capacities has business was about 8.9 mln users. In the reporting year, over made it possible to amend the service by doubling the average 10,000 km of fixed access lines were built and more than 145,000 speed from 18 to 36 Mbit/s for the existing BBA subscribers and homesteads were upgraded to improve communication channels. from 52 to 58 Mbit/s for new connections.

In 2015, MTS made the Basic Digital TV Package much more The detailed information on development of fixed-line attractive by repackaging its channels since July 1. The number of BBA and cable television is set forth in the Business Over- the Basic Package channels increased by more than 40% (from 90 view/Fixed-Line Communication section of the 2015 An- to 130 channels, on the average), the number of the Basic Pack- nual Report. age HD channels nearly trebled (from 9 to 26). It is the biggest regional-market Basic Package which was also included into all package proposals incorporating BBA and telephony.

GPON technology

In 2015, the GPON network making it possible to provide digital to the GPON ultrahigh-speed optic network reached the level of telephony, digital TV and broadband Internet access services at 1,008,100. speeds of up to 1 Gbit/s was finished in Moscow. The network capacity reached 4.6 mln ME ports. 802,000 subscribers were In 2015, the GPON technology was implemented as SmallCell connected to use fiber-optic BBA services. In the reporting transport whenever possible. The advanced OpticalEthernet period, the length of the MGTS optic communication lines came technology was tested. close to 35,000 km and the number of the subscribers connected

2015 Sustainable Development Report 41 Development of backbone networks

We pay special attention to backbone infrastructure expansion since having its own backbone network enables MTS to cut the operating expenses, which, in turn, reduces the service costs for the end users. Having its own backbone networks also enables the Company to deliver the maximum redundancy, which enhances communication reliability, especially as long-distance and international calls and roaming service are concerned.

In 2015, transport networks were built to provide both mobile In 2015, the process of resource exchange between mobile and and fixed-line services, which made it possible to cut the expens- fixed-line communication networks was established and standard es on their development and operation, prevent duplication of software for cable line structure management and performance communication lines and hubs, enabling us to utilize the equip- monitoring was selected. ment thus released and improve the services through resource reallocation. Integration of the transport network operation and development services is planned to be finished in July 2016. In the reporting period, standards and user manuals were developed for construction for convergent transport networks. All On September 8 2015, MTS PJSC finished building its own 100% transport equipment is subject to purchase under a single tender redundant backbone transport network between Siberia and Far which selects a supplier of transport equipment for mobile and East. The project investments totaled RUB 2.25 billion. fixed-line communication based on the MBH (mobile backhaul) network.

FOCL expansion

In 2015, the length of the Russian fiber-optic communication Further information on the telecommunication infrastruc- lines (FOCLs) of MTS Group exceeded 162,000 km; in that year, ture is set forth in the Business Overview section of the more than 9,000 km of FOCLs was built. The pilot version of the 2015 Annual Report. 400G technology was tested in Yekaterinburg.

42 2.1. Telecommunication Infrastructure 2.2. Innovative Services

Striving to provide our clients with the most convenient services, GRI-DMA MTS is systematically developing innovative client products and is in constant search of new applications for cellular services, making the life of each subscriber more comfortable and the business of corporate clients more efficient.

The current MTS activities related to innovation development launch of new products. Any idea having passed the expert and implementation are designed to cover all the needs of our “sieve” and the calculation of its commercial appeal is considered clients in terms of products and services and are not focused on by committee members, including representatives of the Compa- a single area. The company launches new and upgrades existing ny’s various departments and units. Launch of services is carried products and services in response to clients’ changing needs and out only after a general discussion and upon a positive resolution the emergence of new technological opportunities. The company by the Committee Chairman. MTS managers responsible for pays great attention to improving the quality of existing services launching new products and services have extensive expertise in and user features, increasing the convenience for its clients. A the respective areas, take part in telecommunications exhibitions, significant number of projects are being implemented to improve forums, analyze the feasibility of launching and carry out the the quality of data services. launch of services. In addition, the Company’s employees are constantly considering ideas to improve existing services received MTS continues to run a Committee on launching new products from both suppliers and clients. and services — the Company’s main governing body for the

GRI-ТА2

New Technologies New Services

In August 2015, MTS PAJSC was the first company in Russia to In 2015, the following new services were launched: test the WiFicalling technology in the networks of the Moscow Region. This technology makes it possible to provide voice MTS Press pressa.mts.ru – a directory of newpapers and maga- services to cellular communication subscribers when the smart- zines (20,000 subscribers), phone is connected to the MTS network through Internet, via CalloverWi-Fi. MTS Books books.mts.ru – an electronic library service and free book catalogue (23,000 subscribers), MTS also launched the first 4G LTE network in the Moscow Metro. It enables the MTS subscribers to use mobile Internet at MTS Music music.mts.ru – a catalogue which contains over speeds of up to 150 Mbit/s. 20 million songs and musical compositions of various genres (70,000 subscribers).

2015 Sustainable Development Report 43 M2M Services

M2M services1 remain to be one of the most dynamic telecommunication sectors. As estimated by MTS2, the Russian M2M service market increased by 20% at the end of 2015, as compared with 2014, reaching the level of 6.6 mln SIM cards. The number of the M2M-savvy SIM cards in the MTS network increased by 500 thousand to 3.6 mln SIM cards at the end of 2015, making up 55% of the total number of M2M SIM cards in Russia. In 2015, the total M2M traffic in the MTS network doubled, as compared with 2014.

The increasing popularity of M2M technologies is promoted by their percentage (12%) of the total number of the M2M SIM connection of additional services for effective control of re- cards. mote M2M devices. The services make it possible to control the equipment more effectively and to deliver better work security, At the industrial facilities, the number of M2M SIM cards help to locate devices and monitor their movements, and avoid increased by 55 thousand up to 396 thousand (11%). Our M2M unauthorized communication expenses. services are in the highest demand from the oil/gas and power generation companies which need reliable fail-safe communication with hard-to-reach fields and remote branches. MTS’s M2M solutions in 2015 The number of the M2M SIM cards used in the housing/utilities Transport vehicle monitoring still remains to be the leading M2M sector (for metering of housing water, heat, electric power con- application: in 2015, the percentage of the MTS M2M SIM cards sumption, for installation in lifts and doorphones) increased by used in the transportation sector increased by one per cent up to 55 thousand up to 396 thousand. Their percentage in the M2M 44%. The main uses are fleet management, public transport and use area structure remained unchanged at 11%. alarm system monitoring. The Miscellaneous segment accounts for 2% of the connect- The 2015 percentage of the MTS SIM cards utilized in security ed M2M SIM cards, including consumer M2M services. Lately, systems remained unchanged at 20%. Quantitatively, the number the consumer electronic service users demonstrate increasing of such SIM cards increased by 100 thousand up to 720 thousand, interest in innovations, which is due to vigorous development of as compared with the end of 2014. smart home services, including the launch of joint sales of Smart Home appliances by MTS and REDMOND. The number of the SIM cards used in the banking and financial sectors increased by 60 thousand up to 432 thousand, retaining

1 M2M (Machine to Machine) is the common name of the technologies enabling various devices to exchange information between each other or to transmit it in one direction. They can be wired and wireless systems to monitor sensors or some device parameters (temperature, inventory level, location). 2 www.company.mts.ru/comp/press-centre/press_release/2016-02-20-5064560/

The MTS Network Became a Technological Platform for Development of Carsharing in Moscow

On Sept.10. 2015, MTS and Delimobil service, support- nication services under the project. MTS SIM cards ed by the Government of Moscow, launched Russia’s are used in GPS trackers which send the car location first large-scale carsharing project. information to the server to be displayed on the applet map. MTS provides the service of monitoring the movement of rented cars and the entire package of telecommu-

44 2.2. Innovative Services Areas of MTS M2M Use in Russia in 2015

Transport Miscellaneous 44% 2%

Security systems Housing/utilities 20% 11%

ATMs, terminals Industry, power generation 12% 11%

Branch-by-branch dynamics of M2M SIM card utilization

+1 п.п б/и б/и б/и б/и –1 п.п

43% 44% 20% 20% 12% 12% 11% 11% 11% 11% 3% 2%

2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

Transport Security systems ATMs, terminals Industry Housing/utilities Miscellaneous

2015 Sustainable Development Report 45 M2M Manager modem and SIM card for data transmission, which is installed in the vehicle with its owner’s consent. The M2M Manager Service provides the MTS clients with broad capabilities to monitor remote M2M devices in real time. For instance, the service makes it possible to alter the SIM card status Smart Home and set the limits on their real-time functioning, perform indivi dual and group SIM card operations (locking/unlocking, setting In 2016, we plan to launch an integrated Smart Home project. of limits, generation of reports and statistics), notify on the SIM It will consist of a suite of tools to convert any apartment or card status: limits exceeded, SMS-locked, etc. cottage into an intelligent living environment which the user will be able to customize to suit his/her own needs. Simple and In 2015, the M2M Manager Service was augmented with a num- intuitive control will be implemented through integration with ber of new capabilities: the Personal Account and MTS Service applet.

• integrated black/white list functionality Second Memory • Network monitoring option Second Memory is a smartphone applet and a MTS Personal • integrated LBS location functionality Account interface which makes it possible to use the cloud technology to handle the content (photos, music, videos, files) • SMS sending function and contacts and have access from several gadgets. The Se cond Memory service is integrated with most of the Company’s • function of terminal locking to the SIM card (IMEI-Lock) services – Black List, SMSPro, Voice Mail, SMS/MMS Sending from Personal Account, which request the cloud data through the • manufacturer and equipment model identification Personal Account.

• customizability to suit the client’s needs and various interface On December 23, 2015, an updated version of the Second Me optimization options mory cloud service was launched, which is fully compliant with the world’s best OTT practices (DropBox, Google Disc). The users of the new service can access the cloud storage from all kinds of Smart Vehicle Insurance platforms – both mobile ones (Android, iOS, Windows Phone) and PCs (Windows, Mac) and Web, they can exchange content In 2015, MTS continued to cooperate with Intouch Insurance on and conveniently manage it using smart galleries. development of smart insurance services for corporate clients. Cooperation agreements have been concluded with some MTS offers a number of favorable options, ranging from a free other insurance companies, and the respective projects will be option for beginners to 1 TB at a good price for experienced launched in 2016. users of cloud services.

Smart vehicle insurance makes it possible to customize the insur- In December 2015, the new cloud functionality was used by more ance cost with regard to the client’s driving performance. Smart than 0.2 mln subscribers. The total number of cloud service users vehicle insurance is based on a special-purpose M2M unit incor- was 0.9 mln. porating a GPS/GLONASS navigator, three-axis accelerometer, 3G

GRI-PA6 The Fire Monitoring Service (Republic of Tatarstan) has been using M2M services in fire protection systems since 2015. Our M2M SIM cards are used in the Strelets-Monitoring hardware/software system, which responds to smoke by automatically sending the Fire signal from the site to the fire protection unit’s panel.

Fire monitoring systems are deployed at social facilities – preschools, schools, non-apartment specialized homes for the elderly and disabled persons, hospitals, hotels, dormitories, etc. all over the Volga Region.

46 2.2. Innovative Services Over 15,000 M2M SIM cards have been installed in the heat and electric power meters of IrkutskEnergo’s subsidiaries. The specialists use them to remotely take meter readings and maintain accounts of utility consumption. Such remote monitoring allows online detection of all power failures, making it possible to promptly respond to emergencies and restore power supply in the shortest possible time.

Remote Data Reading and registered periodically. The service enables selling companies (providing electric power, gas and water supply services) to In 2015, the Remote Data Reading solution was evolved, which automate reception of consumer meters’ readings quickly and makes it possible to take readings of housing utility meters, inexpensively. The solution incorporates interfaces of mobile meters and industrial sensors of the housing/utility companies, applets for iOS and Android. industrial facilities or other organizations where data is gathered

Examples of M2M projects implemented by MTS in 2015

• In Tyumen, a M2M project to monitor emergency situations • The largest regional M2M project of public transport moni- in Tyumen residential buildings was launched in cooperation toring in the Rostov Region was implemented in cooperation with Bezopasniy Gorod (Safe City) Ltd. In accordance with the with the Medved Trade House Ltd. More than 900 public contract, MTS provided SIM cards to be installed in the city’s transport vehicles were provided with MTS M2M cards all doorphones to inform residents of abnormal situations. In over the region. case of emergency – a fire, gas leak, water failure or another situation – the information is sent in real time from the city • Sberbank PJSC installed MTS SIM cards and protection com- dispatcher, over MTS communication channels and to the munication channels in more than 2000 payment terminals in doorphones where SIM cards are installed, following which a the Samara Region. Mobile M2M solutions of MTS make the clear-cut instruction on safe conduct in the emergency situa- bank’s services available everywhere irrespective of existence tion is given to the residents via doorphone receivers. of fixed-line Internet channels and modern data protection facilities ensure security of banking transactions. • SmartHome home appliance sales were launched under a special program of promotion of affordable and useful • Several thousand M2M SIM cards were installed to take hous- innovations in cooperation with the REDMOND international ing utility meter readings (such projects were implemented in company. the Saratov and Samara Regions, as well as in the Far East).

2015 Sustainable Development Report 47 MGTS Services

In 2015, MGTS transformed from a fixed-line communication service provider into a multiservice universal operator. Its package proposals include television, Internet, fixed-line telephony and mobile telephony. 2015 was also the year when such services, as video surveillance, intrusion detection and virtual ATX were introduced to the market.

Video Surveillance The service makes it possible to watch streaming video on their computers or smartphones. Clients can also use a cloud video Starting from 2015, the subscribers of the MGTS GPON network archive which stores the records for 30 days; the video can be are offered a service of remote video surveillance of their homes. also downloaded into the computer.

Financial Services

MTS Money Card fer message from a mobile telephone to the recipient, stating the amount in rubles, which will be immediately delivered to It is a universal bank card which makes it possible to get interest the addressee. A one-time transfer can range from RUB 10 to on the balance and purchase bonuses. The card is available from RUB 5,000. any MTS shop or MTS Bank office. Clients are also provided with mobile and internet banking functionality. Furthermore, MTS offers the following services: card-to-card transfer, transfer from a telephone account to a bank card, transfer from a card or MTS account to any mobile telephone account, SMS Money Transfer cash transfer from a telephone account in rubles or foreign currency. In summer 2015, MTS launched an unique SMS money transfer service which uses the recipient’s telephone number; to remit For more information on the MTS financial and banking services, the money from an MTS subscriber’s account to mobile numbers please visit www.mts.ru/bankovskiye_uslugi, MTS retail shops or of the Big Three operators, it is just enough to send a #trans- call the operator’s contact center by dialing 8 800 250 0890.

E-Commerce

Starting from April 2014, MTS is a co-owner of the Ozon online In 2015, MTS started a new business line – sale of air and railway store (www.ozon.ru). In 2014–2015, special Ozon order collection tickets – in partnership with OZON.travel. Now you can not only points were opened in MTS shops. The MTS subscribers can also make a booking and pay for tickets, but also print a boarding save and spend MTS bonus points when purchasing from Ozon. pass.

48 2.2. Innovative Services IT Services

In 2015, MTS merged with Envision Group, one of Russia’s major Today MTS offers the complete package of innovative hi-tech system integrators. “one-stop” services: IT consulting, development and implementation of comprehensive integration solutions (incorporating System integration is development of comprehensive solutions mobile and fixed-line communication channels, full-cycle M2M for automation of enterprise business processes. Its ultimate ob- solutions, VAS services, Big Data1 solutions, etc.), software deve jective is to manage a process, production facility, the entire or- lopment, supply of IT equipment from leading vendors, outsour ganization as effectively as possible. The system integrator’s work cing services, aftersales and warranty servicing. always results in that a company gets a unique comprehensive IT solution, which will enable the client to promptly cope with the current business tasks and enhance its business performance.

System Integration Components

System Integration

Comprehensive Equipment as Service, outsourcing, Consulting solutions – ready-to-use a separate line support turnkey product of business

1 Big Data means the data the amount of which exceeds the capabilities of the conventional software products for data gathering and storage, database analysis and management.

2015 Sustainable Development Report 49 2.3. Quality of Service

G4-DMA MTS’ main objective is to provide high-quality communication services to its clients. We are regularly introducing advanced solutions and improving the technical component of client services, opening new offices and striving to improve our services. In many respects, the clients’ attitude to the Company depends on their experience of dealing with front-office employees. Therefore MTS pays special attention to the training of its employees and makes every effort to make the lives of our clients better and brighter.

The main techniques to check client service quality are as • service quality assessment by the MSI (MysteryShopper) follows: method

• IVR polling of the clients who applied to the sales offices – • sale office exit polling of clients to assess the level of satisfac- the aim is to assess the level of satisfaction tion with the key parameters of service

• making of calls by the MTS Outgoing Contact Center employ- • auditing of processes of sale and service in the retail offices ees to the clients whose problem has not been solved in the sales office • automation of shop queuing time monitoring

Call Centre Retail shop Online resources Special capabilities

Google Play and App Store comments on out 6 mln 2 mln 27 mln applets communication quality calls per month clients per month users per month comment geocoding via Yandex.Maps

50 2.3. Quality of Service Information Support of Clients satellite television services, online store services, fixed-line (BBA, DigitalTV, telephony) services. MTS pursues the principle of transparency and availability of any data on the tariffs and service conditions, which underlies our Based on the investigations and employee action analysis, the client information policy. Any MTS tariff and service information mobile/fixed-line business sale/service procedures were im- can be found on our site (en.mts.ru). Furthermore, the Compa- proved and the processes were unified. ny’s clients regularly receive both information on new tariffs and services and useful prompts on such subjects, as tariff optimiza- In the reporting year MTS implemented a Servicing our employ- tion, adjustment of the connected options, enabling/disabling of ees project, which makes it possible to register the applications services, methods for replenishing the account in roaming, zero on the quality of the services provided to the Company’s employ- balance capabilities, locations of the nearest MTS shops, no-com- ees. mission account replenishment, etc. We also publish special booklets and leaflets dedicated to individual tariffs and services. Training in High-Quality Servicing Russian MTS subscribers can obtain the information on the Company’s service conditions, new actions and services, unique We believe that the Company’s success much depends on the proposals from the MTS Contact Center by any convenient meth- professionalism, goodwill and client orientation of out front-of- od: by dialing a common telephone number, writing an e-mail fice employees. Following long-established practice of MTS, or using the chat. The information on the Company’s services all retail employees of any position are regularly trained in and products is available on the MTS channel on the YouTube high-quality client servicing under one of the existing programs: site. The Video Manual section contains the information on self-service, on how to set up the Internet on the computer and • 8,781 employees were trained in the MTS training centers telephone, on how to use the modem and router. • during the year, 1,242,945 employees were trained at special The specialists of seven contact centers pooled into a multisite distance courses provide information and technical support to the MTS clients. The Company’s operators provide any information services to the MTS • 43,173 employees were trained at the master classes on clients on the 24/7 basis free of charge. The available information fixation of high-quality client servicing skills, held by experts is increased as new products, tariff plans and client actions are in the sales offices added. In 2015, some changes were made in the programs of employee training in high-quality servicing. For instance, managers were Retail Service developed by means of new management programs, the On-Site Employee Development training project was started and updated Our own retail chain is one of the main channels of MTS interac- courses of employee training in technical examination were tion with its subscribers. All MTS large and leading shops have launched. The testing has shown that the employee knowledge comfortable waiting places for our visitors. Understanding the level averages 84%. needs of our clients having limited abilities, we equip the en- trance zones of our offices with ramps whenever it is structurally possible. Receiving Claims from Subscribers

MTS is actively using an ACSI (Automatic Customer Satisfaction MTS has a practice that any client can lodge a communication Index) system. In 2015, the existing system was further augment- quality or service claim by any convenient method: by sending it ed by online client polling functionality. Within 30 minutes upon by e-mail or ordinary mail or by completing a feedback form on the client’s visit to the shop he/she receives a satisfaction polling our official site or via the contact center and shop. All communi- call with a proposal to assess the quality of the shop service cation quality claims are transferred for analysis to the Technical according to a 5-point scale. If the client gives a low score, MTS Unit, whose conclusion is used by the claim handling department employees call back asking for the reasons for such assessment employees to reply to the client on the possible ways and time and offering help in solving any issues. Implementing online frame for problem solution. client polling made it possible to promptly obtain more accurate and complete client data on the level of client satisfaction. The Detailed information of the contact centers’ activities, the information thus obtained, is used to compile programs of sys- Real Time Marketing (RTM) system and the functionality tematic service quality improvement, as well as motivation of the of the Medio SCP intelligent platform is set forth in the retail employees and management. MTS 2014 Sustainable Development Report, page 45.

In addition to online polling, more than 10 polls were conducted In 2015, in addition to the Company’s existing client interaction in 2015 to assess satisfaction with such interaction aspects, as methods, a VoiceCallBack scheme was implemented to enable the client to order a callback on his/her own (if the client is not

2015 Sustainable Development Report 51 going to wait, he/she can make a request and the free operator • 185 sales offices were granted the Expert Office status. The calls back). employees of the expert offices were permitted to serve the clients on their own, without the MTS’ service requests pro- Furthermore, Paid Service scheme was implemented, making cessing team, providing all subscriber services to the client it possible to select from various specialist connection options on their own. (paid connection/free connection/callback). The scheme is used in the Premium Cluster Segment in all RF regions (except MR • All over the Russian Federation, the clients can use MTS web- Moscow and St. Petersburg). It proves to be effective through site (the Sales Offices page) to perform online registration absence of claims and stable segmented demand. for servicing in any of the convenient sales office and at any convenient time (with due regard to the sales office working The Marketing IVR service was implemented; when a call is made hours). to the Contact Center, a customized proposal is made to the client, which meets his/her voice and data traffic requirements – • The e-queue system algorithm was refined to allow priority one of the Voice+Data tariffs is offered automatically. servicing of the key clients.

In 2015, the client service centers continued showing a stable de- • It was made possible to perform online monitoring of the crease of the line waiting time, fewer recalls, and a considerable current waiting/servicing situation in the sales office having sales growth in response to the client’s incoming applications. visitor flow control systems.

• An Integrated Fixed-Line Network Control Center was opened G4-PR5 Principal client service improvement measures taken to allow 100% round-the-clock monitoring in the regions. by MTS in 2015: In 2016–2017, we plant to implement the One-Stop service inter- • The retail employee motivation includes FVR (FirstVisitRes- face to integrate all interfaces used by the employees to interact olution) to orientate the employees toward solution of the with the clients. It will accelerate servicing and improve profes- client’s problem during the first visit. sional competency of the sales personnel.

• A universal software system was implemented to automate Owing to all steps taken, the quality of the completed question- entry of audit findings and subsequent processing of them naires improves and the sample became more representative. for the Company’s sales office audit units. The client’s general satisfaction with their servicing by the Con- tact Center shows stable growth; according to the 2015 figures, • Online monitoring was implemented to check client satisfac- 90% of the clients were satisfied with their service. tion with MTS retail chain service.

52 2.3. Quality of Service 2.4. Availability and Security of Services

The Russian and CIS cellular communication market was develop- We believe that providing affordable and quality communication ing at a high pace, which was due to ongoing reduction of prices services at a fair price is one of the most important aspects of for cellular operators’ services and for the subscriber equipment. MTS’ social role. The Company regularly works on developing It resulted in greater penetration of cellular communication into more convenient and profitable tariff plans for subscribers, the broader population strata. Today it is not possible to imagine expanding its range of high-quality branded communication our lives without cellular communication, Internet and hundreds devices at affordable prices and developing its own retail chain of TV channels. Accordingly, Client requirements in terms of the and online store. quality of communication services are growing with each passing year. Subscribers want access to telecommunications, even in the farthest-flung corners of the world.

Tariffs

The increase of general use of the communication services, more active consumption of optional services by the clients and enhancement of their loyalty are the prime drivers of growth in the Company’s traditional mobile telephony sector.

MTS makes fairly priced tariff proposals to its clients, regularly are orientated to a fast-growing segment of smartphone users and timely informs of any changes in the connection conditions and focused on stabilizing the ARPU1, increasing consumption and tariff plans. We have always striven to satisfy our clients: MTS and enhancing loyalty of the clients. The tariff includes packages systematically issues new tariff proposals, taking into account the of minutes, SMS message and Internet traffic covered from the demands and wishes of clients, as well as allowing them to save subscription fee. Cancellation of an extra charge for home-net- on communication. work roaming (during trips in Russia) made it possible to form a strong differentiator of this line. Launching the SmartNonstop In 2015, it is the Voice&Data package proposals – Smart tariff tariff plan orientated to young audience made a great event. plans – that have become the core of our tariff line. These tariffs

Rates

Smart: Voice+Data For mobile Internet Special rates package proposals users

1 ARPU (Average revenue per user) is an index used by telecommunication companies and designating average earnings per subscriber.

2015 Sustainable Development Report 53 Children Security

The Fixiphone tariff option is a package of diversified services providing a kid with engrossing mobile leisure. By default, Fixiphone contains filters which prevent access to black-listed online resources. The filters also cut off SMS advertising and prevent calls and messages to paid short numbers.

MTS is paying much attention to children security on the Internet and implementing the Children on the Internet special project; for more information on the project, see Chapter 3, MTS for Benefit of Society.

MTS is consistently developing and introducing attractive tariff The MTS tariff plans also take due account of the regional pecu- plans for mobile and fixed-line telephony in order to enable liarities, so the marketed proposals are adapted to each of the clients to communicate freely without worrying about the price. regions.

Free calls within the home network make a distinctive feature of The tariffs which are exclusively orientated to mobile Internet us- any tariff plans intended for easier communication. Developing ers make a particular tariff plan group. This group contains tariffs this line enabled us to increase the average MOU and enhance for modem and tablet users. The tablet user tariff plan features subscriber loyalty. We continue proposing no-subscriber-fee tariff unlimited access to MTS mobile television, which also makes a plans to the feature phone-using subscribers. significant differentiator for the subscribers. This service is used by more than 40% subscribers for this tariff plan.

Roaming

We believe that a trip to another region of Russia or abroad The mobile Internet users which continue to use their customary should not lead to a significant increase in the cost of mobile services during trips are offered an updated option “BIT Abroad” communications, and therefore MTS regularly and consistently re- featuring a daily traffic package increased up to 30 MB, which duces roaming prices. In 2015 we cancelled Russian roaming for makes it possible to greatly optimize the cost of mobile Internet our subscribers: the Smart, Smart+, Smart Top and ULTRA tariffs in roaming. include free calls to MTS numbers, gigabytes of traffic, packages of minutes and SMS messages and apply both in the home region The MTS clients who use international roaming in any country and during trips all over Russia. As far as the users of other tariffs of the world have free access to the mobile MTS site version for are concerned, we offer a free option “United Country”, which smartphones, which is able to automatically locate the subscriber makes it possible to receive all incoming calls during trips all over and provide him/her with roaming proposal information specific Russia free of charge. to the receiving state. No traffic fee is charged for MTS subscribers’ access to the mobile site (www.pda.mts.ru). This site can be MTS offers attractive tariffs for communication of our clients in used to get detailed information on the options which makes it international roaming. Today we offer a number of options to possible to save on mobile communication in any country of the the basic tariff plan, which greatly optimizes the cost of voice world and to replenish the mobile phone account from a bank communication in roaming by making incoming calls free. By the card without having to pay the commission and traffic fee. end of 2015, the clients using the Zero without Borders option accounted for a considerable share of the international roaming traffic.

54 2.4. Availability and Security of Services MTS Mono-Brand Retail Chain

The main share of connections carried out by MTS subscribers • improve operating performance being more than 60% is taken by selling via our own mono-brand retail chain actively constructed in Russia in 2009-2010. Our own • increase the client flow sales channel allows increasing the number of connections by monitoring their quality and reducing the level of subscriber • ensure sales of the operator’s key products churn. In 2015, a joint project of MTS and MTS-Bank gained further de- The MTS retail chain got great positive results in the reporting velopment. This partnership allowed MTS to become an integrat- year. Thus, in 2015, it was for the first time in our history that out ed provider of telecommunications and financial services, as well sales volume surpassed those of both Evroset and Svyaznoy retail as using the synergy of the two areas to increase client loyalty chains, and we also launched a new Telephone.ru retail chain. and monetisation. Within the project framework, MTS aims at becoming a supplier of financial services to the largest subscriber In 2015, the distribution geography was broadened and the base in Russia in order to improve loyalty, increase the lifecycle of number of outlets increased by 25%. MTS became the largest subscribers and ARPU. operator’s Russian retail chain with 5,166 shops, of which 1,681 outlets operate under franchise. Key achievements of 2015:

In MTS offices our subscribers can always receive a full range of • Penetration of the subscriber base by financial services services provided by the operator, including of services of the increased by 3 percentage points and reached 15% at the end broadband access to the Internet and television. Thanks to the of the year. customized access to the operator’s interface, any new service released by the company becomes automatically available for • Alongside with the shrinkage in retail lending market and sale in the retail office. Furthermore, our retail clients are offered ceased credit card issuance in the MTS showrooms, the issu- an extensive range of financial services, such as consumer ance of POS-loans in the MTS retail chain resumed. Changes crediting, money transfers, insurance and MTS money cards. The in the risk strategy led to a sharp increase in the quality of mono-brand chain also enables us to exclusively offer favorably POS-loans issued against 2014 being more default. priced telephones and other gadgets to our subscribers. • In February 2015, a new debit product “MTS Money Deposit” Top priorities of the retail chain in 2015: entered the market.

• increase sales of V&D and other data tariffs • The process of integration of MTS financial products and MTS Bank was launched: new product placement principles • increase sales of data-generating devices were formed and financial zones were presented in the MTS retail chain, which are a single point of consumer access to • increase data-related product sales in the B2B channel all financial services. A pilot project was launched in 17 MTS showrooms integrated with the MTS Bank’s offices, which -al • develop the online channel lowed to reduce the operating costs of MTS Bank in the initial phase and to increase the penetration of financial services in • be a service quality leader in the mono-brand retail sector the client flow.

G4-TA2 Public Transport Fare Payment

In March 2015, MTS and the CyberPlat electronic pay- NFCSIM card, which shall also contain the Mobile ment system started receiving payments to replenish Wallet service and the MTS Money bank card (MTS Troika transport card accounts in all of the MTS retail Bank’s MasterCard) in the applet form. Combining two shops in Moscow and the Moscow Region. No com- services on one MTS NFC SIM card allows “one touch: mission is charged on the payment. payment of not only the Moscow public transport fare, but also for the goods and services worldwide In September 2015, MTS launched the Troika Mobile by bringing the phone to the POS terminal having a Ticket innovative service to pay Moscow public trans- PayPass noncontact reader (the MobileMasterCardPay- port fares from the mobile phone. To efect a payment, Pass® technology). it is necessary to have an NFC smartphone and a free

2015 Sustainable Development Report 55 • The process of transferring the MTS financial products to the transactions were achieved in an exclusive cooperation with MTS Bank base (settlement bank) started. partners.

• A number of new services, including innovative (“Mobile We plan to expand the range of the services offered by our Ticket”), were launched. franchise partners and extend the line of the additional products in the MTS shops. • A significant turnover increase for mobile payments on the partner data trading platforms and the growing number of

MTS Branded Devices

MTS continues to aggressively develop its branded device line, striving to increase communication availability and convenience for the clients. The consumer properties of the MTS branded smartphones and tablets are in no way inferior to those of similar gadgets of well-known world-class manufacturers while they are less expensive. In 2015, MTS branded devices were presented in all popular market segments.

Smartphones

In 2015, branded smartphones accounted for 10% of the retail share.

We pay special attention to sales of 4G devices. In 2015, the 4G smartphone share increased by 19 per cent and reached 31% of the sales. Special projects in collaboration with Alcatel, Samsung and Microsoft made a great contribution into the share increase.

In 2015, we abandoned the margin in sales of mobile gadgets, thus reducing their prices by 30%. We chose to decrease our earnings deliberately in order to enable the subscribers to buy more LTE smartphones and start using them actively.

We are closely watching the market trends and timely respond- ing to the growing requirements of our clients. The MTS Smart Sprint 4G smartphone was awarded “2015 Best Gadget according to Russian-speaking Internet” in the Operator’s Smartphone category.

Client satisfaction is assessed in respect to each of the MTS-branded smartphones, the assessment findings are used to make conclusions and correct the specifications for new devices. Up to the present, there were no instances of clients’ dissatisfac- tion with health and safety effects of the MTS devices.

The MTS Smart Sprint 4G smartphone was awarded “2015 Best Gadget according to Russian-speaking Internet” in the Operator’s Smartphone category

56 2.4. Availability and Security of Services Online Store (shop.mts.ru)

In 2015, MTS continued developing its online store – the orders were delivered by couriers to 30 regions of Russia. In most of the cities where we deliver orders, the clients are offered an option of paying with bank card.

The MTS online store functionality makes the process of choosing In the reporting period, the MTS online store became much more a phone very convenient. It incorporates buying tips, which are popular, the number of online visitors grew by 49% against 2014 based on opinions of other buyers who bought similar products. to become greater than 27.1 mln unique users. The number of Furthermore, the store uses a product filter with an ample choice orders booked via our Web-site increased several fold during of options; by using it you are able to pick up a selection of prod- the year to become 802,000 (including orders self-collected by ucts that exactly match your needs. The user-friendly interface buyers). The online store’s share in the Company’s turnover grew makes the choice easy thus saving the buyers’ time. from 4% in 2014 up to 9% in 2015.

2015 Sustainable Development Report 57 2.5. Customer privacy

G4-DMA We pay great attention to protection of confidential data of our clients. When processing the personal data, the Company protects them in accordance with the international and Russian laws. The personal data disclosed to MTS are treated as classified information and are subject to protection in accordance with the Russian laws.

Regulatory framework of personal data processing with changes Personal data security is achieved through the use of legal, which became effective in 2015: organizational and technical measures of protection applicable both to paper document flow and to IT systems. To protect the • Federal Law No.152-FZ of July 27, 2006, “On Personal Data”, rights of personal data subjects, the Company uses a personal including amendments relating to localization of processing data protection system; a work team for organization of process- of the RF citizens’ personal data in Russia; ing of such data has been established and employees entrusted with responsibilities for processing and protecting the personal • RF Ministry of Communications and Mass Media’ Order 315 data have been appointed. We perform regular audits to check of May 28, 2015, “On Changes in the Administrative Regula- the observance of personal data security requirements. tion of the RF Federal Service for Supervision of Communica- tions, Information technologies and Mass Media”, in respect When concluding a Communication Service Contract with MTS, to the Personal Data Processing Notice (registered in the RF our subscribers are informed on how their personal data will Ministry of Justice on Dec.1, 2015); be used. The procedure for processing the subscribers’ personal data is described in the Company’s Rules of Provision of Com- • Federal Law No.162-FZ of June 29, 2015, “On Standardiza- munication Services, which are an integral part of the Service tion in the RF”. It regulates standardization in the area of Contract. These Rules and the Policy of Personal Data Processing information security, including personal data protection. Its in MTS PJSC are available at the Company’s official Web-site. MTS requirements are mandatory if the regulatory act refers to the partners that are engaged in processing of personal data sign a information security standard (GOST). special Confidentiality Agreement, which specifies the personal data security and processing requirements as well as data protec- • Russian Federal Security Service’s Guideline No. 149/7/2/6- tion means that ensure secure transfer of data. 432 of 31.03.2015, “On development of regulations that identify personal data security threats relevant to personal MTS routinely takes part in assessing the effect of existing reg- data processing in personal data information systems while ulations and developing new ones. However, no such work was carrying out particular types of activity”. The regulating done in 2015 since the telecom operators are engaged only if the authority (RF Ministry of Communications and Mass Media) regulating authority considers it necessary to use the services of uses this document to identify the personal data security industry experts. In 2016 we expect the regulating authority to threats which are relevant to the telecom industry. continue identifying personal data security threats relevant to the telecom industry and developing a relevant regulation in line • Company’s Policy: “Personal Data Processing in MTS PJSC”. with Part 5 Art. 19 of the Federal Law “On Personal Data”.

58 2.5. Customer privacy As far as the regulatory effect assessment is concerned, we action of information. Visualization environment protection was tively participate in the process of effect evaluation; a Company’s implemented for the purpose of transition to the technology representative is on the Advisory Board attached to the author- of virtualization of personal data information systems. Firewall ized agency for protection of the rights of the personal data certification is in progress, as required by RF Federal Service for subjects where new initiatives are discussed by workgroups. MTS Technical and Export Control’s Order No.9 of Feb.9, 2016. representatives take part in the work of the Interim Commission under the Council of the Federation on the Information Society In 2015, no justified complaints of violation of the G4-PR8 Development, which develops amendments to the personal data consumer’s privacy and consumer data loss were protection laws and analyzes the subordinate regulatory acts. filed. No cases of consumer data threat or loss were In 2015, we continued developing our privacy protection system. revealed. The Company upgraded its system for cryptographic protec-

2015 Sustainable Development Report 59 MTS 3. for the Benefit of Society

3.1. Social Programs...... 62 3.2. Cooperation with the State...... 84 3.3. Environmental Responsibility...... 85

3.1. Social Programs

Charity

Charity is one of the major aspects of the MTS’s corporate social responsibility. The Group’s charity policy in this field is governed by the following principles:

• our priorities are the projects focused on improving the quality of life of society and helping severely-ill children;

• we are dedicated to implementing long-term charitable projects that are in line with the state’s social policy priorities and contribute to solution of acute social problems that impact broad population strata;

• we are interested in projects which can be implemented as broadly as possible in the countries where MTS is active;

• we are implementing projects focused on establishing equal conditions and opportunities for residents of far-away regions and large centers;

• we believe that today’s innovative technologies make a considerable contribution to improvement of the quality of life, so our priorities are the charitable projects in which our technologies, products and services help solve this task;

• we believe that health-improving charitable projects and the projects contributing to harmonious deve lopment of the younger generation are highly desired by society;

• we are ready to cooperate with the government authorities, non-profit organizations, business community representatives in implementation of joint charity programs compliant with MTS social policy and charity policy, performed on the equal partnership terms and subject to the condition that the legislative and other restrictions applicable to the Company are observed.

62 3.1. Social Programs “Operation Smile”

It is already for the seventh consecutive year that MTS is supporting the Operation Smile program jointly conducted by a Russian and an international charity organizations.

In 2015, children having congenital lip and palate defects were and with the specialists of the receiving hospital and patients. cured under the program in Ulan Ude, Ufa and Krasnoyarsk. Furthermore, our company furnished special play rooms in children hospitals to entertain small patients who came for surgery MTS provided mobile communication to the doctor/volunteer from various parts of the Transbaikalia, Bashkiria and Siberia. team to enable them to effectively communicate with each other

Operation Smile

2015 Sustainable Development Report 63 Generation M

Generation M is a creative charity project for children from all over Russia. Kids and youths, schoolchildren and students – everybody can become a part of all-Russian creative movement Generation M.

Generation M is the largest charity project in Russia, uniting the ping charity through children creativity support we involve them idea of developing creative abilities of children and rising funds in virtual and real activity, give them an opportunity to become for treatment of severely - ill children. The project was invented familiar with “safe Internet” and accept universal human values. by MTS, the leading creative organizations of the country and the masters of Russian arts help the Company to implement it. The project motto reads “Creativity in the Name of Life”.

The website pokolenie.mts.ru is on-line platform with bright The audience of the project is kids and youths, their parents, content to develop creative capabilities of kids and youths. All ac- representatives of art professions, government bodies and wider tivities on the site are being transformed into a real money which public. are spend for treatment of severely- ill children. While develo

Awards

Finalist of SABRE Winner in the Gamifi- 2015 Nominee of the Winner of the Winner in nomi- Awards 2015, the cation and User-Gen- Runet Award Corporate Charity nation “Big heart” major international erated Contests nomi- in the Culture, Mass Leaders 2015 award of the 10th jubilee award for excellence nation of In2 SABRE Media and Mass Com- for creative approach award “HR-brand” in public relations, Awards 2015. munications. to charity. branding and reputation management.

64 3.1. Social Programs 2015 Results

The Internet audience exceeded > 8.5 mln persons

Number of unique mass media releases on the project > 11,000

Number of information partners > 90

Number of online and offline participants of creative abilities > 400,000

Number of creative laboratories supporting the project all over the country > 250

Number of original creative works uploaded to the site about 11,000

13.9 mln RUB collected to treat 21 kids with oncological diseases

2015 Sustainable Development Report 65 MTS Corporate Volunteer Movement «Just Give Good!»

MTS has been developing the Corporate Volunteer Movement “JUST Give Good!” for over six years, which is gaining momentum from year to year, attracting responsive persons having an active life position. Today the movement involves about as many as 6.5 thousand MTS employees who regularly participate in the Compa- ny’s volunteer actions. In 2015, the volunteers held more than 500 events all over the country.

The corporate volunteer movement is a manifestation of the cor- existing and potential volunteers, proposing them to participate porate social responsibility of business, which is becoming more in various charitable and social projects of MTS in various parts and more popular with the employees, enabling the Company of the country. The volunteer movement participants can trace to enhance loyalty of its employees and boldly solve important their involvement into the Company’s social programs in their social tasks, integrating them with the business tasks. convenient personal accounts, where they can also track the MTS project developments. In December 2015, a technological platform was launched to develop the corporate volunteer movement. The service, specially The Company’s employees are given virtual badges for their developed by Mail.ru’s Good project for MTS will make it possible participation in all kinds of volunteer initiatives – intellectual vol- to systematize volunteer project management in the Company unteer actions, help to children, programs of support of elderly and provide the necessary tools to coordinate large-scale volun- persons, ecological and nature conservation projects – and they teer movement in various host regions of MTS presence. can demonstrate the symbols of their achievements in social networks. Mail.ru’s Dobro (Good) technological program, customized for MTS, allows systematic use of the base of the Company’s

66 3.1. Social Programs Volunteer’s Anthem

The Anthem was written by Oleg Chukhnin, expert of the Mobile Communication Switching Network Development Department of the MTS Technical unit.

They look like ordinary people, They are nearby, they live among us, We’d never have a chance to know them, If trouble does not come just for while.

And then they’ll silently stand by, To support in hard time, They’ll gratuitously give The care that will make pain melt away.

They are volunteers, they are volunteers, Their hearts are open, their hearts are hot, They are bringing us a bit of sun Mixed with a bit of their souls. (Twice)

Who will help with their word and deed To those who abandoned hope, Who will be a skilful guide, Who will take us to a new goal.

Who will make Internet a friend to Both the elderly and kids – no matter! Who will bring a fairy tale with a new useful plot To everybody, teaching in addition.

They are volunteers, they are volunteers, Their hearts are open, their hearts are hot, They are bringing us a bit of sun Mixed with a bit of their souls. (Twice)

Who will go to see kids, bring them presents, Who will become Father Frost that day, Who will warm them up with their hot hearts, It will be a fest – a New Year Party for Kids.

Who will not spare his time and himself at times, Will give his blood, overcome his pain, Will tell the disabled man that we are equal, It is their destiny, the salt of life.

2015 Sustainable Development Report 67 Technologies and Innovations

Telecom Idea Competition of Startups

The open industry competition Telecom Idea (telecomideas.com/en/home) is held in Russia and the CIS countries since 2011. The competition is focused on searching, supporting and marketing the youth’s innovative projects of use of information and communication technologies in the commercial, social and public spheres and contributing to improvement of the quality of social life.

In 2014, the event became an international one when represent- khan, Belgorod, Voronezh, Krasnoyarsk and Sverdlovsk. In 2015, atives of 40 Indian higher educational institutions took part in the competition was run in the following nominations: it. In 2015, the most talented young developers of the Republic of Belarus joined them. During the 5 years of Telecom Idea • TECHTech (academic solutions in communication systems) existence, more than 900 startups took part in the competition. The competition TelecomIdea-2015 attracted students, young • MEDTech (virtual medicine) scientists, research teams and young entrepreneurs. • ECOTech (ecological projects) Out of more than 300 applications, the final phase of the 2015 competition was reached by 35 innovative projects from Moscow, • EDUTech (educational projects) St. Petersburg, Tula, Ryazan, Yaroslavl, Samara, Kaluga, Astra-

68 3.1. Social Programs • ADVTech (creative and advertizing projects)

• FINTech (finances, banking services)

• HUSTech (housing and utilities)

• RETAILTech (retail)

The major award was an invitation to go on an innovative educational tour to Israel and to submit their projects for review by the MTS experts and partners. Based on the competition results, the authors of the ideas which are most compliant with MTS business goals can participate in a unique acceleration program in collaboration with the Company’s employees to finalize the projects for further implementation.

The projects admitted into the accelerator can have a week of collaboration with the MTS representatives to improve their projects and implement them in the MTS existing processes. The first corporate accelerator was held in 2014. In two years more than 30 projects passed the corporate accelerator, and some of them continued cooperating with MTS.

In 2015, MTS held a corporate accelerator for 18 best IT and telecommunication projects, which resulted in selection of 5 innovative ideas which will be admitted to the super-final of the federal accelerator GenerationS.

Проект «Телеком Идея» победил в номинации «Лучший проект по стимулированию и развитию инновационной деятельности» на конкурсе «Время инноваций–2015»

2015 Sustainable Development Report 69 G4-DMA Educational Programs

G4-EC7 Web for All Ages

GRI-PA2 Federal social & educational project Web for All Ages (www.svvp.ru) has been developed by MTS since 2012, supported by the Foundation for Internet Development, Nation Health League, Link between Generations charitable foundation and other partners. Its primary goals are to improve Internet literacy, popularize modern information technologies and useful online services among people aged over 40, assist them in acquiring practical skills of internet use for solving everyday tasks.

The training is based on the educational program Whatever Your work, e-mail, messenger and social networks, Internet banking Age, You’ll Master Internet, developed by the specialists of MTS, and commerce, governmental and social services, leisure and Internet Development Foundation and Psychology Faculty of the multimedia entertainment, mobile Internet and useful smart- Lomonosov Moscow State University, accounting for the needs phone and tablet applets, network security rules. Trainings are and sociopsychological peculiarities of senior people and based conducted by volunteers and the seniors who have been trained on skill transfer from experienced Internet users to the begin- under the program, wish and are trained well enough to teach ners. what they themselves have mastered to their age mates.

The training course consists of seven lessons covering such In 2013, the Russian experience was replicated in the CIS coun- subjects, as navigation and information search on the Global net- tries. Starting from October 2014, the trainings are attended by

70 3.1. Social Programs pensioners in all regional centers of Belarus. During four years, the training under the program Web for All Ages was received by a total of 15,000 persons.

In 2015, the graduates of the courses Web for All Ages presented the MTS team at the V All-Russian Championship on Computer Decathlon among Retirees (in Moscow and Kazan) organized by the Russian Union of Pensioners (RUP) and supported by the Council of the Federation Committee on Social Policy, RUP, RF Ministry of Communications and Mass Media, RF Pension Fund.

2016 Plans:

• To integrate the Tablet phase into the All-Russian Computer Literacy Championship – to be supported by MTS in collaboration with the RUP, RF Ministry of Communications and Mass Media, Council of the Federation Committee on Social Policy and RF Pension Fund;

• To extend the Mobile Academy project, in collaboration with the RUP, to 10 regions of the RF;

• To update the www.svvp.ru site in accordance with the usabil- ity study findings.

2015 Sustainable Development Report 71 “We continue developing the projects focused on teaching Internet literacy fundamentals to the population. The primary task of ours as one of the leading Internet access operators, is to demonstrate advantages of mobile Internet to the maximum possible number of people of all ages. That is why we are launching in Moscow the Mobile Academy project which will show the seniors that mobile internet and modern gadgets are simple and easy to use. We are sure that the training graduates will become sophisticated users of Internet services and they will be able to use their smartphones to make electronic purchases, register for reception by the doctor, buy air and railway tickets, communicate with their relatives and friends”

Yelena Seregina, MTS CSR Department Director

Mobile Academy

In 2015, MTS PJSC developed a free training course Mobile will be awarded Master diplomas and network use skill self-de- Academy being a continuation of the basic training program for velopment kits by the MTS experts. In elderly people training, seniors. The training course is focused on people over 50 who MTS joined hands with the Yedineniye Sports & Culture Youth are new to smartphones and tablets. The course will teach them Center Autonomous Non-profit Organization. to use mobile Android devices, to download and use mobile applets, to connect to mobile Internet, use the mobile browser. The Free classes of the MTS Mobile Academy have been already students will be also taught how to make electronic purchases, opened in Kazan and Obninsk. book a visit to doctor, use the Internet to communicate with their relatives and friends. The course will include not only the infor- Later on, we plan to develop the Mobile Academy Projects in all mation on use of devices and Internet, but also the fundamentals RF Federal Districts, establish an integrated educational portal, of mobile Internet security. open new Internet classes, attract new partners from among the governmental authorities and non-profit organizations, and In autumn 2015, the first permanent classroom of the MTS disseminate educational procedures among all stakeholders. Mobile Academy was opened in Novogireyevo, (a district of By now, we have established a methodological basis for project Moscow). Its curriculum includes Internet literacy lessons and development in all regions of Russia. practical training in smartphone and tablet use. The graduates

MTS Laboratory

The specialized MTS Laboratory enables technical stu- University, National Research Institute “MPEI” and dents to actually control modern telecom equipment the Oryol Branch of the Moscow State University of in the high educational institution. The MTS Labora- Railways; under the agreements, the university and tory is a hardware package of switches and routers operator plan to develop educational, innovative and which can be used to build data network segments research activities to improve the quality of training and illustrate data package transmission in cellular of the students of the relevant specialities. Under the communication networks and Internet networks. agreement MTS plans to exercise expert and resource support of the students’ telecom projects, organize In 2015, MTS launched its Laboratories in Bryansk, master classes, business laboratories, as well as train- Smolensk and Oryol under cooperation agreements ing, work and pre-diploma practices for the students. with the Academician I.F.Petrovsky Bryansk State

72 3.1. Social Programs “Deti Online” (Children Online)

Today kids begin using the Internet at the age of 5-6, but the schoolchildren of our country use the World Wide Web more actively and unfortunately in a riskier way compared with their European coevals. What is more, most of the Russian children surf the Internet on their own – on the average, 80% of the Russian children use the Internet in their rooms and via mobile phones, i.e. in the situations when their parents do not virtually control them.

Being the biggest Russian telecom operator, MTS attaches great leading Russian museums and libraries, Internet literacy lessens importance to protection of children from negative content, for junior schoolchildren and workshops for teachers. fraud services and the sites that are harmful to detrimental to the child’s mind. Our clients have access to the services, which So far, more than 300,000 persons – children, teachers and par- make it possible to arrange effective and safe Internet use by ents – have taken part in the project. Exhibitions and lessons of the younger generation. We are convinced, however, that our useful and safe Internet have been held in more than 30 regions mission is not limited to creating safe and convenient services for of Russia. In 2015, the project was successfully implemented in World Wide Web surfing – we shall also cultivate in children the Novosibirsk, Tomsk, Syktyvkar and Penza. responsibility for what they do on the Internet. In 2015, a new program for cooperation with the parents and MTS has been implementing the “Deti Online” Program (de- the teachers’ community was developed successfully within the tionline.com) since 2011, supported by the RF Ministry of framework of the Children on the Internet project: Talk to Your Communications and Mass Media RF Ministry of Education and Child about Internet. This program is mainly focused on improv- Science, Safe Internet League and other partners. The program is ing awareness of adults, parents of under-aged children and focused on popularizing the rules of useful and safe Internet use schoolteachers, on issues of the Internet information security for among children, parents and educators. Under the “Deti Online” children and adolescents. Program, the Company holds interactive thematic exhibitions in

2015 Sustainable Development Report 73 2015 Main Results:

• A booklet entitled “Talk to Your Child about Internet” was The project “Children Teaching published to inform and educate parents of under-aged Adults” has become a winner children. in the category “The best Media Project in Education” • A “How to Talk to Your Child about Internet” parent-teacher at the VII Russian national meeting scenario was developed. competition “The Top-10 Public Sector IT Projects. Education and • 12 events – 3 open lessons, 2 Children on the Internet master Health Care Institutions”. classes for volunteers, 3 “How to Talk to Your Child about Internet” master classes for parents and school teachers, 1 parent-teacher meeting, 1 webinar for parents – were held.

All told, more than 1,700 persons, including 75 junior school- of Interneshka and Mityasik”, “Kids Online” All-Russian help line). children, 30 volunteer guides at the Children on the Internet ex- The “Talk to Your Child about Internet” booklet was given a very hibition, 360 educators, more than 1,230 parents of under-aged favorable reception by parents and teachers. Guidelines issued children, took part in the project events. as a part of the projects, in particular a webinar entitled “How to Talk to Your Child about Internet”, can be used in further work By and large, the project results show that the projects, which with parents of under-aged subscribers of MTS PJSC. inform and educate parents and teachers on the issues related to safe Internet surfing by children and adolescents, are highly desirable and socially important. Thanks to the meetings with 2016 Plans: parents under the auspices of the project, broad parent audience has learned about other projects of MTS PJSC in the field • implement the project in all federal districts of RF of helpful and safe Internet (Children on the Internet education/ exhibition project, helpful and safe Internet lessons “Adventures • develop innovative and interactive educational content

Children Teaching Adults

The Children Teaching Adults social and educational project is being implemented by MTS since 2013; it focuses on solving an important social tank of building modern information society in Russia, bringing generations closer to each other.

The project is run in schools of more than 50 cities/towns, among • teaches the users of all ages how to use mobile services the schoolchildren of Grades 7 to 10. The key idea of the project is that adolescents who have excellent Internet skills share their • fosters better understanding between children and adults knowledge with adults. After receiving preliminary methodological training, schoolchildren give lessons to adults teaching them More than 300 schoolchildren from all over the country gave to safely and effectively use mobile technology opportunities in their video lessons as a part of competition Children Teaching everyday life, also via modern gadgets – smartphones, tablets, Adults in 2015. The main prize awarded to the winners of the etc. national stage was an excursion tour to St. Petersburg, involving a visit of the Generation M charitable musical performance for Children Teaching Adults Project: children.

• helps children get occupational guidance and understand whether they would like to devote themselves to IT technologies

74 3.1. Social Programs Culture and Society

Events to Celebrate the 70th Anniversary of the Victory in the Great Patriotic War

Victory Salute! Jubilee Concert

On May 16, a Victory Salute! large festive jubilee concert to celebrate the 70th Anniversary of the Victory in the 1941-1945 Great Patriotic War was held at the Poklonnaya Gora Concert Hall. The concert was a charitable event by the Moscow City Veteran Council and MTS, jointly with the Russia Begins with You Moscow Festival, and supported by the JSFC Sistema.

The Poklonnaya Gora concert was attended by about 250 war veterans from 12 administrative districts of Moscow. The per- formers included creative children teams who were nominees of the competition “Russia Begins with You”, professional artists of the Gzhel state academic dance theatre of the Moscow school of choreography, the Syurpriz exemplary municipal children song theatre from Vyazniki, Vladimir Region, Ivushka veteran teacher chorus and Zemlyaki veteran chorus from the Ivanovskoye district, Moscow.

Help a Veteran! Volunteer Action

On the eve of the Victory Day, a volunteer action entitled Help a Veteran! started, during which the employees of MTS, JSFC Siste- ma and its subsidiaries personally congratulated veterans. Later on, we plan to provide targeted volunteer help to sponsored war veterans and war-time civilian workers who live in Moscow.

On the eve of the Victory Day, the MTS employees made their contribution to congratulating veterans by giving them the joy and pleasure of socializing. During the action the volunteers congratulated about as many as 400 veterans living in Moscow, as well as Khimki, Mytischi, Schelkovo, Noginsk, Krasnoarmeisk, Yegorievsk, Tomilino. The volunteers personally visited the war veterans and made commemorative presents to them.

2015 Sustainable Development Report 75 MTS Memory Book

The MTS employees actively participated in the corporation-wide volunteer action and created the MTS Memory Book “Life during By having implemented program War. 1941–1945”, which incorporated the stories told by their rel- “MTS Memory Book “, MTS has atives who were war veterans. The book is illustrated with pho- become winner of the 4th Best tographs and is a real evidence of those heroic years. The Book Social Projects of Russia annual contains 327 stories and is available both in electronic (vov.mts. national contest in the Corporate ru) and printed form. The Memory Books have been ceremonially Projects nomination. handed over to the Moscow Museums, including the Central Museum of the Great Patriotic War on the Poklonnaya Hill.

On October 14, 2015, a ceremony was held in the Exhibition Complex of the State Historical Museum to hand over a copy of the Memory Book “Life during War. 1941–1945” to the museum library.

The publication is to commemorate the 70th anniversary of the Soviet people’s Great Victory over the fascist Germany and its allies. The book encompasses 300+ historical narratives written not by journalists or historians but by MTS employees as told by their relatives who had evidenced those dreadful days. The “Memory Book” shows us and our offsprings the Great Patriotic War how it was – without embellishment and fiction.

Book handover to the museum library took place as a part of the Victory exhibition which keeps the historical and artistic relics of the Great Patriotic War.

The event arranged by MTS and the State Historical Museum was attended by honorary guests - the veterans who contributed to the Book and represented the Moscow City Veteran Council.

The attendees were greeted by Aleksey Levykin, Director of the State Historical Museum, who thanked MTS for contribution of its employees into the history of the country. “Our memory of war shall not be forgotten or revised. Remembering the past, we shall keep the memory for ever for the sake of the future,” he noted.

A copy of the Memory Book was ceremoniously handed over to the Museum by Mikhail Arkhipov, Mem- ber of the MTS Management Board, MTS Vice President: “We present the “Memory Book. Life During War” to the State Historical Museum, making our contribution to the Great Memory of generations”.

76 3.1. Social Programs «War. What We Know about It?» intellectual and Victory Tango MTS Action educational quiz On May 24, 2015, the Victory Tango annual MTS volunteer action MTS took part in preparation of the “War. What we know about was held in the Yekaterininskiy Park. The action involved festive it?” intellectual and educational quiz, an engrossing narrative dancing master classes in the style of the 1940-1950’s for all park of important events, facts and heroes of the Great Patriotic War. guests and veterans, accompanied by a brass band. Many of the events of that ware are little known and treated differently. Thanks to the quiz, the employees got a unique change to learn to share this knowledge and were able to propose to show the quiz in schools, museums and to their relatives.

2015 Sustainable Development Report 77 Preserve Musical Heritage of Russia

MTS provides support to a unique project Preserve Musical Her- of exclusive music manuscripts, preparing and performing the itage of Russia, which was initiated by the Russian State Musical music, recording concerts, uploading the records to the Server of Radio & TV Broadcasting Center. The purpose of the project is to the European Broadcasting Union (EBU), publishing the record- re-discover music and war songs written by composers who are ings on Internet portals, and broadcasting first performances veterans of the Great Patriotic War. The project involves selecting from the Orfei Radio and Just MTS Radio portal.

Mobile Fairytale Puppet Theatre

Since 2012, MTS has been running its Mobile Fairy Tale Pup- Gogol Center theatre event. The puppet theatre has become the pet Theatre (puppet-mts.ru). The theatre repertoire includes best format of volunteer work for children – puppet companies Morozko, Magic Mirror, Snegurushka and Fox (New Year musical perform in the cities of Krasnodar, St. Petersburg, and Irkutsk. fairy tales), Children on the Internet (an educational musical fairy tale), Saving the Planet Earth and History of a Prince (ecological Volunteers took part in the All-Russian Ecological Festival in musical performances). The MTS volunteers give these perfor- Kremlin; for a full year they made performances to kids in medi- mances in the sponsored orphanages and to the children of our cal institutions. employees and partners. In the course of four years, their performances were seen by over In 2015, the Theatre gave performances in the Central Macro Re- 10,000 children from large families, families of the employees of gion to the children of employees of MTS and social institutions the Company and its partners, kids from sponsored child welfare of Oryol and Tver. The performances became a part of the annual organizations, and young patients of hospitals and rehabilitation actions of the Volunteer Movement “Just Give Good!”, “Green centers. Express”, New Year performances for children, and the annual

78 3.1. Social Programs In 2015, the Volunteer Puppet Theatre was nominated the For Social Initiative award at the Belgorod Fun-2015 International Theatrical Festival.

2015 Sustainable Development Report 79 Social Employer (Social HR)

In 2015, we continued to implement our Social HR project that attention to the fact that we all have equal opportunities. The covers hiring and adaptation of employees of mature age and event was attended by 1,000+ people; young professionals with disabilities, as well as creation of an affordable and comfortable environment for all staff categories. • International film festival “Cinema without barriers” that offers pictures from life of people with disabilities and tells In the reporting period, MTS supported a series of major socially stories of their struggle and success to introduce spectators significant events: to those who live and work in spite of any obstacles;

• Competition for young job seekers with disabilities “Road to a • Sporting events to include people with disabilities in sport: Career” that allows business to discover untapped resources joint football matches “MTS Unity Cup” and beach volley of young, ambitious and talented professionals; ball games with corporate teams of MTS and other major businesses. • Annual “Best Friends” dance marathon where MTS tradition ally involves its employees to once again attract public

MGTS CSR Projects

Honoring Great Patriotic War Veterans at MGTS Meeting of orphanage children with Paralympians

Annually, on the eve of the Victory Day, a meeting of telecom In January, a meeting of orphanage children with Paralympians people with Great Patriotic War veterans from MGTS is held at was held. The atmosphere of real sports festivity was created at a commemorative monument (25 Bolshaya Ordynka Street). It the orphanage. The kids watched with a keen interest a Paralym- was they who defended our Motherland on the battlefield and pians’ Olympic fire relay and jocose team competitions. Joint restored and developed capital telecommunications in the hard games simulating Olympic competitions in various sports truly post-war years. amused both the children and adults.

At the meetings the company management and representatives In their turn, the educators and pupils also prepared an exciting of the MGTS trade union committee thank the veterans for their show program. Dressed in vivid clothing, they sang joyful songs contribution to the victory, for the strong spirit and will they and performed exhilarating dances; they proved again that demonstrated both on the battlefield and at the labor front, the abilities of the persons with limited abilities are actually express their gratitude for the spring and freedom they present- unlimited. ed to us. Following a long-standing tradition, the attendees keep a minute of silence in remembrance of the MGTS employees who died in the battlefield and lay flowers to the monument where Victory-Day Volunteer Garden Clean-up Event their names are engraved. In May, a Victory-Day Volunteer Garden Clean-up Event was held. Veterans who cannot attend the MGTS ceremony because of their Volunteers from MGTS, Sistema CF, MTS Bank, MTS, Medsi, Zhura- health problems are visited by the members of MGTS trade union vushka pupils and employees worked at the Krasnaya Dubrava committee. They congratulate the veterans with the Great Victory orphanage for disabled children. After finishing the event, the holiday, presenting flowers and gifts. children and volunteers laid flowers to the Krasnaya Dubrava Obelisk of the warriors who fell in the Great Patriotic War.

Help a Veteran Volunteer Action First Grader’s Backpack charitable event Help a Veteran Volunteer Action is one of the numerous actions in which the MGTS employees took part one in the jubilee year In August, the MGTS employees ran First Grader’s Backpack of the Great Victory. Volunteers visited war veterans and war-time action by gathering voluntary contributions of school supplies for civilian workers, presented gifts and socialized with veterans. orphanages by using branded for the supplies. The ranks of volunteers increase from event to event, which indicates that there are a lot of indifferent people among the MGTS employees.

80 3.1. Social Programs MGTS Museum Cultural Heritage Days

The Museum of MGTS plays a great role in preserving the For the 4th consecutive year the Museum opens its doors traditions, forming and developing the corporate culture, on April 19. The Company’s employees receive invitations by attracting able and talented youth to the Company. The Museum corporate e-mail. Furthermore, the action organizers post the has unique exhibits illustrating not only the history of Moscow notice that the museum can be visited, the excursion schedule telephone network development, but also the other lines of and the museum location on the Cultural Heritage Day site telecommunication technologies from 1876 up to now, and the (dninasledia-voopik.ru). Any Muscovite can get a list of museums artefacts of the sociocultural environment of Moscow and capital participating in the action and select those interesting to him/ inhabitants. her. The Cultural Heritage Days always fall on the week-ends so those who wish to visit museums could do so.

2015 Sustainable Development Report 81 CSR Projects in Countries of Operations

Uzbekistan

On June 18, 2015, UMS LLC’s first CSR project was started; it was commemorate the 70th anniversary of the victory over fascism devoted to the Children Protection Day and implemented in in the Second World War and to form the image of a socially partnership with the Tashkent Region Branch of the Uzbekistan responsible Company, UMS LLC launched the Veteran preferential Disabled Persons’ Society. Disabled children from Bekabad, Kibrai, tariff on April 10, 2015. It is intended for the subscribers who Yangiyul, Chirchik and Tashkent were invited to the Tashkentland participated in the 1941-1945 Second World War and worked Entertainment Park and took part in the festivity. at the labor front. It features 200 free outgoing minutes to all networks per month and zero subscription fee. As of March 2016, To support the State Policy of the Republic of Uzbekistan, the the Veteran PT is used by 131 subscribers. Year of Care for the Older Generation Government Program, to

Turkmenistan

The Call a Front Friend service was launched. This service enables • Nastroyeniye Entertainment Portal enables the subscribers the Great Patriotic War veterans, veteran widows or war-time to have interesting and lively leisure by listening to various civilian workers, who are subscribed to the Social tariff plan, to entertaining and informative information (jokes, aphorisms, make free outgoing international calls totaling 30 minutes. useful tips, curiosities, statuses, games). The calls to the service are not billed. The service is activated after the service On June 16, 2015, the Our Heroes – Our Victory book presenta- is subscribed for. tion was held to commemorate the 70th Anniversary of the Victo- ry in the Great Patriotic War. The electronic book contains more • Zabava Entertainment Portal Service enables the clients than 33 war time stories told by MTS-Turkmenistan employees. to listen to various entertaining information (jokes, tests, acquaintances, player). In 2015, Turkmenistan’s unique services of the Zabava (Fun) and Nastroyeniye (Mood) portals were launched to provide the subscribers with innovative services:

Armenia

Partnership of VivaCell-MTS and Fuller Center Social Investment Program for Housing Armenia The company on a voluntary basis implements social investment Fuller Center for Housing Armenia is a non-governmental char- programs in the Republic of Armenia to help the organizations itable organization which supports social development in the and communities needing tangible or intangible assistance to Republics of Armenia and Artsakh, promoting construction and implement various projects. Pursuing its social investment policy, repair of simple, decent and affordable houses and consistently VivaCell-MTS supports the following spheres: acts to protect the right of people to have decent living conditions. VivaCell-MTS provides financial support to the project of • Technologies and communications improvement of the housing conditions of low-income families. Since 2007 the cooperation has helped 93 families. • Education

82 3.1. Social Programs • Environment protection reduction of power consumption, which contributes to environment protection. In addition to that the program offers novel • Social and community development innovative eco-friendly solutions and provides an excellent model of rural community development which makes the villagers equal • Public health and safety participants of the program, taking active part in its implementation. • Sports, culture and arts

Educational Fund Program Alternate Energy Program The program is designed specifically for the orphan students with The program is implemented jointly by VivaCell-MTS and Founda- special needs and for students from socially vulnerable families. tion for the Preservation of Wildlife and Cultural Assets (FPWC). Since 2011, about 700 academically successful students have The Alternate Energy Program addresses a number of important been involved into educational process, 53 of them made use of problems: outdoor lighting in remote villages, cost cutting, the program for four years and graduated as Bachelors.

Belarus

In 2015, a large-scale project #MyWorkoutToday was started to The Children on the Internet and Network for All Ages programs popularize healthy life style. Under the project, two events: Great are also implemented in Belarus. The company aids orphans, Sports Festival in Mogilev and Great Sports Festival in Grodno veterans, acts as a partner of educational and sports events. were held in collaboration with the UN Mission in the Republic of Belarus. The events attracted more than 1,000 participants. A 2016 program has been approved to develop the project in Minsk and regional cities.

2015 Sustainable Development Report 83 3.2. Cooperation with the State

MTS always takes account of the state interests. The Company uent entities (Administration of Kirov Region, Administration of closely cooperates with the federal governmental authorities in Nizhny Novgorod Region, Administration of Krasnodar Territory, the host countries and with local regional authorities. In Russia, Administration of Khanty-Mansi Autonomous District — Yugra, MTS takes active part in advisory and other work teams of the Administration of Krasnoyarsk Territory). The Company is also a Ministry of Communications and Mass Media, State Duma, Fed- partner in a number of regional projects aimed at the vocational eral Antimonopoly Service, Chamber of Commerce and Industry, training of students and graduates of higher education institu- Russian Union of Industrialists and Entrepreneurs, Commissions tions. attached to the RF President. Our specialists are always ready their expert assessment and make their proposals concerning the The Company’s top managers actively participate in Russian and drafts of major laws and regulatory acts related to telecommuni- international industry forums not only as delegates, but also as cations. active speakers.

In 2015, the Company took part in reviewing the matters and 2015 forums at which MTS top managers spoke: preparing the proposals related to urgent industry problems, initiated changes in a number of regulatory acts. Participation of • St. Petersburg International Economic Forum (A.Dubovskov, MTS in discussion of such issues enables us to play an important V.Latsanich) role in implementation of nation-wide interests, including better availability and safe access to modern communication services • Barselona Mobile Congress (V.Latsanich) and promoting innovative development of the state. Being a subject of anti-monopoly regulation, MTS nevertheless takes active • Internet Economics Forum (R.Ibragimov) part in improvement of the anti-monopoly legislation. It helps to establish feedback with the regulating authorities and create • Vedomosti’s Telecom Forum (N.Bratchikova) new business opportunities. • Russian Internet Week (M.Arkhipov, R.Ibragimov) On December 25, 2015, the results of voting of the Association G4-16 of Managers of Russia were announced on appointment for a pe- • St. Petersburg International Legal Forum (R.Ibragimov) riod of one year of the Committee Chairmen, who were to come into office in 2016. Ruslan Ibragimov, MTS PJSC Vice President on • RBK’s HR in the City Conference (Yu.Tereschenko) Corporate and Legal Issues was elected Chairman of the Business Legal Support Committee. Yelena Kokhanovskaya, MTS PJSC • Vedomosti Newspaper’s Financial Forum (A.Kornya) Public Relations Director, took the lead of the Association’s Mass Media and Information Policy Committee and she will co-chair • Vedomosti Newspaper’s Business Informatization in Russia with the Public Relations Director of the Norilsk Nickel Mining (K.Karapetyan) and Metallurgical Company. • PeopleInvestor Business Forum (Yu.Tereschenko) In 2015, we implemented a number of projects with a focus on socioeconomic development of regions. Thus, MTS entered into • Kommersant’s Legal Regulation of Telecommunication Indus- five partnership agreements with administrations of RF constit- try Forum (A.Rego).

84 3.2. Cooperation with the State 3.3. Environmental Responsibility

We believe that any socially-responsible company must do business taking into account the possible impact of its activities on the environment. MTS’ business is founded on the principle of a careful approach towards nature and the Company strives to minimize its environmental impact as much as possible. In 2015, MTS implemented a number of internal and external measures with a focus on increasing environmental awareness, improving the environment and educating an eco-disciplined generation.

MTS Russia’s total environmental expenses, thousands of rubles

+25.8%

941,026.6 833,734.7 1,048,773.9

Expenses on environmental impact prevention and on environmental 427,208.8 343,746.1 561,107.6 management system 513,817.8 489,988.6 487,666.3 Expenses on waste management and cleaning and damaged environment rehabilitation

2013 2014 2015

2015 Sustainable Development Report 85 G4-DMA Management of Environmental Activities

Management of environmental activities is conducted by MTS’ dedicated units in each macro‑region. The necessary environmental actions at the national level are arranged by the Administrative Unit (Department of Real Estate and Office Management Division) and HR Unit (Corporate Social Responsibility Division). At MGTS, the management of environmental projects is carried out by the Environmental Protection Division of the Department for the Maintenance of Buildings and Structures.

Following the recommendations of International Standard ISO of product life cycle implementation. The MTS purchase proce- 26000, the Company implements a package of environment-re- dure participants shall confirm their consent to abide by the Code lated package of measures. MTS strives not only to attract the to submit their commercial offer. employees’ attention toward responsible attitude to nature but also enable them to help it with real deeds. The network facility design shall include the “List of Environment Protection Measures” to be developed in accordance with GOST In 2015, MTS Russia’s total environmental expenses R 21.1101-2013. The requirement to implement these measures increased by 25.8% up to RUB 1,048.8 mln. is a must-do for contractors. Whether the environment protec- G4-EN31 tion measures have been implemented is checked at the facility acceptance phase. The MTS Supplier’s Code of Business Conduct (the Code) declares an insistent wish that the Suppliers shall have an effective envi- The MTS supply chains are on the Supplier’s side. The require- ronmental policy and that they will observe the existing envi- ment to observe the MTS Supplier’s Code of Business Conduct, ronmental laws and regulations. If possible, the Suppliers shall which provides that an effective environmental policy shall exist, practice a proactive approach to environmental issues, undertake is imposed on every supplier. MTS PJSC has no yet implemented initiatives focused on improving environmental responsibility and supplier assessment by the environmental criteria and obser- foster eco-friendly technologies and the use of efficient methods vance of the human rights.

G4-EN29

Fines (in money) and total non-financial penalties for non-observance of environmental laws and +25.8% regulatory requirements

MTS Russia’s total 2013 2014 2015 environmental expenses in 2015 Fines, thousands of 00.0 00.0 100.0 rubles

Non-financial penal- 0 0 0 1048.8 ties, cases mln RUB

86 3.3. Environmental Responsibility Environmental Initiatives

Eco-Telecom All-Russian ecological campaign «Save a Tree»

The project is focused on implementing environmental accul- In 2015, the MTS employees again took part in the ecological turation of the MTS employees and promotes increasing their campaign “Save a Tree”, whose purpose is to help solve the prob- responsibility for observing a set of simple but effective rules: lem of waste and over-consumption of the planet’s resources. saving of water, saving of forest resources, collection and correct recycling of finger batteries and old telephones, humane attitude Waste paper is collected in the administrative offices on the toward the environment. quarterly basis. On the average, 5,000+ kg of waste paper is sent by the MTS employees to recycling every quarter. In 2015, Since 2013, the Eco-Telecom line is approved by MTS PJSC Board the MTS employees collected 15,335 kg of waste paper. The em- of Directors as one of the top priorities in the field of corporate ployees managed to save 153 trees, 15,335 kW of electric power, social responsibility. Implementation and support of environ- 306,700 l of water; they prevented the emission of 26,070 kg mental projects with participation of the Company’s employees of CO2. Days of Fruits and Vitamins are held quarterly for the and MTS volunteers is approved as part of the strategy of the employees of the most active water paper collection office. MTS HR Unit. 2015 Results of the Save a Tree Action: In 2015, the EcoTech nomination was announced in the MTS youth innovative project competition Telecom Ideas. The Posadi • in April, a certificate was obtained to confirm that MTS is a Les (Plant a Forest) online tree planting project won in this nomi- participant of a global environmental project Save a Tree; nation. A tree can be planted or even presented at posadiles.ru.

ECO-Office

Since 2012 we have been implementing an Eco-office project, which provides for the maximum involvement of the MTS employees in our environment protection program, including waste collection actions, environmentally-friendly recycling and sound use of energy. The project aims are to promote environmental awareness and upgrade the environmental culture among staff. In 2015, awareness posters on ecologically responsible conduct were updated.

Batteries, Get Recycled! environmental action

The action of collection of used batteries in administrative offices, launched in 2012, continued to be implemented in 2015. As much as 350 kg of used batteries was collected for recycling. Thus, more than 1,500 kg of batteries was sent for recycling in the program implementation period.

Starting from 2015, the used batteries and accumulators of telephones, tablets and other devices can be brought to a MTS retail shop where they will be stored and transported safely and recycled in an eco-friendly way. In 2016 we plan to launch a battery collection and disposal project in the MTS shops all over Russia.

2015 Sustainable Development Report 87 • in September 2015, a Diploma was awarded for the 3rd place in the international campaign FSC Friday, an annual festival of responsible attitude toward forest;

• in December the Nature Resource Preservation and Planting In 2015, MTS was in the TOP-5 Certificate was awarded for our pine contribution in the of the Russian Green Offices Moscow Region. Rating of GREENS Ecobureau in partnership with the WWF On May 2015, the traditional charitable clean-up event was help in the ISKRA orphanage. The Company’s employees took active part in landscaping.

In October 2015, during the conference of the Macro‑region Ad- ministrative Unit employee conference held in the ISKRA boating house, a bird cherry garden was planted and an Green Office and Spring clean-ups Man in it eco‑lecture read by the leading expert of the Greens Ecobureau. On May 30, an annual eco-clean-up event was held. This year the event was held under the System Energy motto and timed to Greenery was planted around our Smolenskaya-Sennaya office the 70th Anniversary in the Great Patriotic War. More than 2,000 and 3a 1st Dorozhny Proyezd office. employees of JSFC Sistema, 27 subsidiaries and members of their families tool part in improving the Otradnoye Sanatorium site. A special program was held for children and adults, including mas- “Earth Hour” ter classes, a performance of the Children’s World Puppet Theatre and other useful open-air activities. On March 28, 2015, MTS Company again took part in the international ecological campaign “Earth Hour” held by the World That day a total of 1,300 trees, flowers, shrubs were planted on Wildlife Fund (WWF). 20 hectares of the sanatorium site, more than 17 flower beds and

88 3.3. Environmental Responsibility The tour performances of the Mobile Fairy Tale Puppet Theatre are devoted to environmental subjects. The performances are intended for kids aged 5 to 12 and conducted in the format of a musical interactive game. They how important it is to be friendly to nature and each other, how to make life good not only for us, but also for our children and the children of our children.

lawns refurbished, a bright children playground and a workout During the smartphone and accessory procurement procedure, equipment ground were set up. More than 900 implements were MTS performs their testing and the products of dubitable quality purchased specially for the event. Thanks to the corporation are not allowed to be tendered. For instance, examples can be employees’ creativity, high concrete walls of the sanatorium given that smartphones having acrid chemical odor and bodies transformed into a real work of art! of fragile materials have not been accepted.

All customized subscriber equipment models (smartphones, USB Environmental impact assessment modems, routers, TV consoles) carry the EAC certificate. Moreo- ver, the packages and components are marked with the “Dispose During the MTS ecological events, the environmental impact of Separately from Domestic Waste” symbol. plastic and package production is assessed. Based on this assessment, it has been decided to switch over to ECO-carton packages. When starting to design a radio access network facility, its sanitary certificate is developed and submitted to the Rospotrebnad-

2015 Sustainable Development Report 89 zor-accredited organization to be reviewed for SanPiN (Sanitary In 2016 we plan to switch over to electronic document exchange Codes and Regulations) compliance. Then the certificate is sub- with the business tourism agency (applicable to employees’ mitted to Rospotrebnadzor which issues an opinion on whether business trips), which will result in considerable paper savings the design documentation is SanPiN-compliant. and courier service’s carriage costs.

After facility construction is finished, the Rospotrebnadzor-accredited organization takes measurements at the facility, issues Environmental impact of vehicles its opinion and measurement record, which are submitted to Rospotrebnadzor. As a result, MTS obtains the sanitary/epidemio- Owing to the nature of our business, our direct environmental logical opinion on SanPiN compliance of the functioning facility. impact is limited to emissions of our car fleet. When purchasing vehicles, we take account of the (Euro 3, 4, 5) ecological standards. Implementation of electronic document management system

In 2015, the users finished switching over to the improved web version of the Boss Assistant software. The MTS Corporate Center switched over to a new document registration system.

Data on Ecological Classes of MTS Vehicles (Region Breakdown)

Total vehicles Euro 5 Euro 4 Euro 3

Moscow 300 139 160 1

Center 260 53 160 47

Volga Region 403 19 364 20

Far East 136 0 136 0

Siberia 178 20 108 50

South 361 32 233 96

Urals 246 33 189 24

North West 204 38 157 9

90 3.3. Environmental Responsibility Energy Saving G4-DMA

Our work does not directly affect the environment, but all our facilities, including cell phone towers, office buildings, sales offices and contact centers consume electric power. Most of the generating stations in Russia operate on gas and coal, and emit carbon dioxide. We are aware that the more traffic grows and the faster the subscriber base expands the more energy we consume, which inevitably leads to an increase in the load on generating stations, and thereby harms the environment.

Since 2010, MTS has been implementing a “Strategy of energy September 2015. That the consumption increased insignificantly saving and energy efficiency”, focused on limiting the growth after the 3G network launch is due to the integrated approach to of and reducing the consumption of electric power; all MTS 3G network construction, namely, upgrade of the network, instal- subsidiaries in the regions implement their own energy conserva lation of new, less power-intensive equipment, implementation tion and efficiency programs. For details on implementation of of free-cooling systems. the “Strategy of energy saving and energy efficiency”, please refer to Page 125 of the Taking Care of Environment/Energy Saving We implement new energy-efficient equipment everywhere and section of the MTS Group’s 2014 Sustainable Development Re- implement power efficiency programs; otherwise, considering port. In 2015, energy saving and energy efficiency programs were the network growth, power consumption would be higher. developed in all regions. When purchasing stand-by power supply sources for our base Power consumption growth is caused by the expansion of our stations, we are guided by the energy efficiency criterion. To network (commissioning of additional base stations and the provide power back up for its major facilities, the Company uses Company’s other infrastructures (data processing centers, call diesel power plants of the leading European manufacturers centers, etc.)) and data traffic growth. The traffic increase and (Wilson, SDMO, Geko, Inmesol), which impose very stringent additional equipment installation result in the growth of power requirements on fuel consumption efficiency and 2CO emissions. consumption by the base station sites. The growth of the electric power tariffs causes the cost of the power consumed to grow. The overwhelming majority of the HVAC systems installed in the MTS Moscow buildings use controllers capable of maintaining The drop of power consumption in the Ukraine is caused by the indoor temperature and switch off ventilation systems in the Crimean Territorial Department having left the MTS Ukraine off hours. These and some other arrangements at the Moscow PrJSC in 2014. If we do not consider the 12014 Crimean Territo- Region facilities allow us to save hundreds of kilowatts of electric rial Department’s data, the 2015 power consumption grew by power every year. 1.6%, because of phased launch of the 3G network starting from

In December 2015, MTS launched Russia’s first LTE region, on the Lago-Naki mountain plateau in the network base station whose power cells operate on western Caucasus. In 2015, a solar generation based air-hydrogen fuel. The new power supply system is electricity supply system was also installed on the eco-friendly, compact and its service life is up to five Kitovoys Rebro Pass on the Sea of Japan coast in the times longer than that of the conventional solutions. Far East. The station is situated in the Noginsk District of the Moscow Region. In future, we plan to use alternate sources only where is not possible to connect to classical external Nowadays wind power plants and solar cells are used power supply system. The use of alternate sources is to power the MTS base stations on the coast of the hindered by their high cost. Barents Sea and Onega Lake in the North-Western

2015 Sustainable Development Report 91 G4-EN3 Power Consumption by MTS Group’s Companies in Host Regions

Year Power consumption. kWh

Russia 2014 824,300,874.0

2015 936,966,976.3

Ukraine 2014 264,391,266

2015 255,389,393

Turkmenistan 2014 24,711,149

2015 29,066,219

Armenia 2014 32,938,796

2015 33,543,016

Belarus 2014 92,549,000

2015 94,479,000

Energy Resources Consumed by MTS PJSC in 2015

Resource In kind In money, RUB, exclusive of VAT quantity unit of measure

Heat 44,241.73 Gcal 64,111,044.80

Water 264,619.71 m3 8,886,258.08

Gas 1,031,904.36 m3 5,912,450.79

Gasoline 2,989,635.54 liters 86,001,184.13

Diesel fuel 3,965,485.16 liters 117,229,233.71

92 3.3. Environmental Responsibility Waste Management

MTS produces various wastes, including hazardous and recyclable ones. We take a responsible approach to waste disposal, and therefore, one of the main requirements of any draft agreement with a waste disposal contractor is our insistence on a complete cycle of treatment for the waste removed from our offices, that is, sorting and production of secondary raw materials, presentation of reporting and supporting documentation and the option to check the progress and quality of waste management services provided.

G4-DMA In 2015, a total of 1,171.322 tons of waste was generated, the party which won a respective tender, or contract specialized waste was fully transferred to contractors for recycling and waste disposal companies. We deliver spent equipment to a disposal. Thus, 28.849 t were recycled; 14.210 t neutralized and specialized contractor, which dismantles it, and then sorts and 1,128.263 t buried. weights the resulting scrap metal. The scrap is then checked for compliance with relevant GOST, examined by a pyrotechnist, neutralized, classified as intrinsically safe and cleared for processing Disposal of telecommunication equipment and melting. After that, we pass the resulting scrap metal to the recycling contractor for further processing. When disposing of telecommunication equipment, we usually sell spent devices back to the manufacturer, transfer to a third

2015 Data on Disposal of MTS Equipment, kg

Ferrous metal scrap Non-ferrous metal scrap

Moscow 78,938.00 30,154.00

Center 96,896.00 74,801.00

Volga Region 29,197.60 8,071.60

Far East 20,179.00 17,854.00

Siberia 45,981.60 135,522.70

South 7,669.00 48,428.50

Urals 220.69 3,093.25

2015 Sustainable Development Report 93 MTS 4. for the Benefit of Personnel

4.1. HR Policy

MTS staff is a crucial factor in the Company’s success. All achievements of our business, the dynamics of its development depend directly on the skills of our personnel, competitive working conditions and a fair and respectful approach to each employee. We are constantly improving social and labor relations and look to create best conditions for safe work, promoting the professional and career growth of our employees. We are sure that it is the attitude to our employees that largely determines their bona fide conduct in the Company.

“Considering the scale of our business, MTS is actively investing into the human resources, which enables it to stay the best Russian employee: last year, MTS was given the Best Employers Study 2015 international award of AON Hewitt, an international HR consulting company, and AXES Management, its Russian partner. More than once it was given People Investor’s award granted for companies’ contribution to human capital development.

Our Company has developed an unique corporate culture which enables us to understand each other better and have a common language. According to HeadHunter, we have the best “Idea Factory” for the employees, which makes it possible for each of us to turn his/her boldest and innovative ideas into reality. Every year our employees take part in the RegiOn corporate competition and read the Zaprosto (No Problem!) corporate magazine during work breaks.

MTS strives to enable each employee to develop his/her MTS professional and personal business competencies!”

Andrey Dubovskov, MTS PJSC President

96 4.1. HR Policy In 2015, MTS was recognized In 2015, MTS was given as one of the 11 best Russian In 2015, MTS was given People Investor’s award for employers (according to HeadHunter’s award for youth implementing the RegiON AonHewitt BEST EMPLOYERS handling STUDY International intracorporate competition Certification)

The MTS team is more than 70,000 people working in six coun- Talen Q tests), staff turnover and involvement and any other G4-9 tries, endowed with innovative thinking, capable of generating necessary data. and implementing new ideas, going outside the ready-made work patterns and turning the most unusual and bold projects • The HR Administration Center was implemented. It is a into reality. solution to support centralized HR administration in the United Personnel Service Center on the basis of the software The MTS HR policy is implemented in full compliance with the products of Abbyy and UCM. ABBYY’s solution makes it possi- G4-DMA labor legislation and other regulations of MTS countries of ble to scan, verify and send the HR information to the United presence. The MTS employees earn fair remuneration and get Service Center to be used for processing and (automatic and decent social protection. The Company has every condition manual) generation of HR events in the OEBS, keep docu- for safe labor. Engaging highly skilled personnel and talented ments in UCM’s electronic storage. youth to MTS is an important component of the HR policy. • A Feedback mobile applet was developed to assess the fellow The 2015 top priorities of the HR policy were enhancement employees by our SIMPLY values scale during the year. It is of business process performance and creation of an optimum also possible to save one’s notes in the personal account of environment for professional and career growth of the em- the performance management system and use then during ployees. In the second half of the year the United Personnel the next regular performance assessment. Service Center, which centralizes operational HR management processes, started functioning in Nizhny Novgorod. The 2015 MTS HR expenses totaled RUB 56.2 billion as compared with the 2014 figure of RUB 49.1 billion, 2015 HR Management Innovations: which was due to MTS Group restructuring. The addi- • The Virtual Academy was launched which is an innovative tional RUB 962 mln was the Company’s payments to training service implemented by MTS. The Virtual Acade- the workers who were involved in MTS activities but my encompasses a large number of online courses; many who were not MTS employees. of them are grouped into training programs. They can be integrated with the major online training providers, such as The Group builds its social and labor relations with the staff Coursera, Lynda.com, Udacity, etc. The mobile applet makes based on social partnership, which implies equality, respect and it possible to train at home and while traveling. The Jam consideration for the interests of the parties concerned, as well social network is integrated into the Virtual Academy; it is a as compliance with existing laws and regulations. MTS has devel- forum for experience exchange, participation in development oped a friendly corporate culture, an atmosphere of gratitude, events, holding of corporate programs and competitions. care and recognition of the achievements of each member of our mutually supportive team. The MTS HR policy is based on • The Manager’s 8 Rules is a poll which gives a chance to pro- transparent and fair relationships with the staff, the Company has vide feedback on any manager of the Company. The polling is developed a friendly corporate culture, an atmosphere of grati- done online, which makes it highly anonymous but absolute- tude, care and recognition of the achievements of each member ly transparent. of our mutually supportive team.

• The Personal Account feature was implemented to provide MTS concludes a labor contract individually with each employee an online information storage to our employees, which is and there is no practice of concluding collective agreements used to keep all personal data, Company track records of with the Company. All benefits, guarantees and compensations the employees, their performance data, results of various (including those benefits, guarantees and compensations in polls (the Manager’s 8 Rules, Hogan, Hay, 360 Assessment, addition to those provided for by the labor laws) are stipulated in various local regulations of MTS. We strictly adhere to the re-

2015 Sustainable Development Report 97 Personnel Involvement 2015 MTS Group Personnel Structure, persons Last year the level of staff involvement rose from +5 p.p. +7 p.p. 65 to 70% in MTS Group and from 73 to 80% in MTS PJSC. The MTS Russia internal NPS level increased from 32 to 43%, 2/3 of our employees 65% 70% 73% 80% are ready to safely recommend MTS as a decent employer to their friends and relatives.

More than 90% of our employees took part in the 2015 MTS Group involvement poll, which is equal to 65,000 people in absolute figures.

2014 2015 2014 2015 in MTS Group in MTS PJSC

G4-11 quirements of applicable labor laws and do our best to take into performed on a voluntary basis. At the same time the Company account the interests of staff and if work disputes arise we are does not favor activities which may result in the conflict of inter- committed to their fair and just resolution. In case of a change in ests. If it is probable, the employee shall report it (in accordance the conditions of the contract or its termination at the initiative with the in-house procedure) before he/she becomes engaged in of the Company, all MTS employees receive notice thereof two such activity. G4-LA4 months in advance. In September 2015, the Company’s firstCareer Day – Much of the Company’s work is done by our regular staff em- a large-scale event for the MTS employees, focused ployees, including those of subcontractors. The suppliers are not on introducing other employees to the Company’s assessed by the criteria related to the practical labor relations. No assessment is performed of the significant actual and potential career opportunities – was held. adverse impact on practical labor relations in the supply chain. G4-DMA The employees can apply via the Unified Hot Line (the internal The Company widely uses the practice of career growth based on control and audit line ([email protected])) to solve the issues rotation between regions and management levels: this approach related to the compliance with the Code of Business Conduct means that each employee has an opportunity to gain useful ex- and ethics, to settle corporate conflicts, to get help in the case of perience and skills and learn to know the MTS business in various abuse of authority.In 2015, 13 applications were lodged via offi- regions. Our Corporate culture encourages the employees’ social cial complaint channels were registered, of which 10 complaints activities if they are focused on social and educational goals and were settled in the reporting period. G4-LA16

98 4.1. HR Policy 4.2. Personnel Structure

Personnel Structure and Number of Employees1

In 2015, the number of MTS employees amounted to Total Headcount 73,967 which is 7.9% more than in 2014 due to MTS Group restructuring. 2013 2014 2015 change: 2014-2015

MTS PJSC 30,800 31,051 30,879 –0.6%

TOTAL 65,963 68,549 73,967 7.9%

2015 MTS Group Personnel Structure G4-10

Term contract Part-time employment Non-staff employees 4559 persons 479 persons 4338 persons

Standing contract Full-time employment Staff employees 66,174 persons 70,254 persons 70,733 persons

By employment contract By employment type Staff and non-staff employees

1 Unles otherwise indicated, the number hereinafter given does not include the employees working under civil contracts and outstaffed ones.

2015 Sustainable Development Report 99 2015 Age and Gender Structure of MTS PJSC Personnel

G4-DMA MTS supports a gender- and age-balanced team structure. We are sure that this approach allows the Company to ensure the stability of the staff, a healthy corporate morale and maintain and share professional experience.

G4-LA12 Breakdown of MTS Personnel Breakdown of MTS Personnel by age be gender

13% 83% Senior management

87% 17%

4% 13% 72%

Middle management

83% 28%

47% 7% 49%

Junior management and rank-and-file employees

46% 51%

46% 7% 50%

Total

47% 50%

≤ 35 years men

35—45 years women > 45 years

100 4.2. Personnel Structure 2015 Age and Gender Structure of MTS PJSC Personnel1

≤ 35 years 36-45 years > 45 years Total

men women men women men women men women

Senior management 0 0 18 3 2 1 20 4

Middle management 18 7 350 144 59 19 427 170

Junior management and rank- 6,187 8,093 7,292 6,689 1,403 594 14,882 15,376 and-file employees

TOTAL 6,205 8,100 7,660 6,836 1,464 614 15,329 15,550

1 For MTS Russia

2015 MTS Group Personnel Breakdown by the Region, persons

Group MTS Russian MGTS RTC Ukraine Armenia Turkmeni- Uzbeki- Russia subsidiar- stan stan ies

Women 35,232 15,526 747 3,842 12,826 1,201 520 331 239

Men 35,501 15,289 1,588 4,849 10,533 1,500 602 315 825

2015 Sustainable Development Report 101 G4-DMA Employment of Local Human Resources

Whenever possible, we aim to provide jobs to local specialists in MTS host countries and regions. This approach is targeted at increasing the well-being of local communities through increased employment, and promoting economic growth in the regions. Over 90% employees of MTS are host region residents.

Percentage of top managers who are residents of presence regions G4-EC6

Presence region %

Russia 92

Ukraine 100

Belarus 100

Armenia 100

Turkmenistan 100

Uzbekistan 0

Total: 94

G4-DMA Discrimination control

MTS does not allow any discrimination in the employment, work, professional or career growth of any person. We follow a principle of tolerance towards the ideological, religious, racial, physical, and/or personality differences of our employees. In hiring people with disabilities, we are guided by the applicable legislation of the Russian Federation and countries where we operate. We do not use child labor or forced labor. In recent years, no cases of discrimination on any grounds or incidents of child or forced labor at MTS or its suppliers have been recorded.

MTS bans discrimination and harassment, violence or threat of personal peculiarities: race, colour, gender identification, ethnic- violence or another inappropriate conduct toward the Company’s ity, nationality, religion, age, disability, social or marital status employees. We strictly adhere to the principle of equality and sexual orientation, culture and other personality characteristics respectful attitude to all of our employees regardless of their protected by the law.

102 4.2. Personnel Structure Staff Turnover

MTS is implementing a set of measures aimed at reducing staff turnover: we regularly monitor and analyze the reasons for dismissals to improve the situation. The Company also uses special adaptation programs for new employees, which have a positive impact on their relationship with the team, facilitate their introduction to the role and help employees fulfill themselves at a professional and personal level.

MTS is implementing a set of measures aimed at reducing staff duction to the role and help employees fulfill themselves at a turnover: we regularly monitor and analyze the reasons for dis- professional and personal level. missals to improve the situation. The Company also uses special adaptation programs for new employees, which have a positive Due to these measures, the MTS employees demonstrate high impact on their relationship with the team, facilitate their intro- involvement and low staff turnover.

G4-LA1 Number and percentage of newly hired employees, staff turnover

Host Region Number of hired employees, Percentage of hired Turnover, % persons employees, %

Group total1 5,629 15 11

Ukraine 359 13 11

Belarus 125 8 8

Armenia 41 4 6

Turkmenistan 79 12 9

Uzbekistan 440 41 11

Russia1 4,585 14 11

1 Minus RTC and contact centers.

2015 Sustainable Development Report 103 4.3. Motivation and Social Guarantees

Personnel Motivation

The Company operates a competitive payroll system consisting of fixed and variable parts. The compensations’ and benefits’ package is provided to Company’s employees, which meets practices existing on the labor market.

The principles of competitive wages and fair remuneration lies at the heart of all staff remuneration systems at MTS. The Company uses an integrated approach to the system of staff motivation and applies the best international practices of pay that allow for objective evaluation of the performance of employees and MTS as a whole, and the motivation of employees to increase efficiency. The principles of payroll competitiveness and fair reward underlie every system of MTS personnel remuneration.

Financial incentives

The amount of a fixed part of the remuneration (official salary) individual tasks fixed in evaluation forms of each employee. It is defined taking into account salary ranges established for each depends on actual results and aims to stimulate the financial in- position category (grade) on the basis of labor market analysis in terest of all categories of employees in the continuous improve- the host region and Company’s Positioning Policy in respect of ment of work efficiency to achieve the strategic, operational and the labor payment market. financial objectives of the Company. The ratio of variable and fixed parts of total income is balanced for each position in ac- The variable premium part in the Company is represented by cordance with its potential impact on business results. The more the incentive system which provides for clear and transparent influence, the higher the proportion of the variable component. principles of establishment target bonus sizes and calculation of its actual values on the basis of key performance indicators and The 2015, MTS salary averaged RUB 64,000 (including fixed salary and a bonus). The Company has a system of bonuses for employees engaged in sales and subscriber services. A distinctive feature of this system is the structure of income with a greater variable part and different frequency of payments. For the Company’s In 2015, the United Personnel Service Centre was employees responsible for direct sales, there exists a commission launched, which makes it possible to radically bonus scheme (direct sales interest). change the speed of basic operating service for the employees.

104 4.3. Motivation and Social Guarantees The 2015 MTS Group labor remuneration expenses evaluation results a plan of developing measures is generated amounted to RUB 54.6 billion, of which RUB 31.7 bil- for employees, and key employees are defined, who are included lion is the salaries, RUB 11.8 billion is bonuses, RUB in the MTS talent management program. In 2015, 95% of our 11.1 billion is insurance premiums. employees have been officially evaluated for performance. The company plans to perform this evaluation in 2016, too.

All Company’s employees participate annually in the performance Thanks to a qualitatively built personnel development system, evaluation procedure which includes both an evaluation of key 4 out of 5 manager’s vacancies in the company are filled from in- performance indicators and the competence development level. house staff pool. And implementation of new advanced remote Managers during the evaluation process provide an extended training platforms in 2015 will enable us to provide opportunities G4-LA11 feedback based on annual work results, besides, following the for employee’s development with high quality and availability.

Intangible incentives

We pay great attention to non-financial motivation. MTS imple- Every year, we select the best employees, managers and project ments the “Intangible Personnel Motivation” Policy, establishing teams. Successes and achievements of MTS employees are regu- the basic principles and areas of non-financial stimulation of the larly publicized in corporate print media and in the news feed of Company’s personnel, as well as determining a set of measures the corporate portal. focused on fulfillment of the employees’ needs not directly related to monetary compensation.

Social Guarantees

MTS provides its employees a broad compensations’ and benefits’ package focused on social protection of G4-LA2 employees. We believe that enhanced commitments are necessary to provide additional social protection measures for employees, allowing them to feel comfortable and confident in any situation. MTS provides its employees with the full range of social guarantees established by applicable legislation, but not limited to. In MTS, all employee benefits fall into social and corporate ones.

Corporate benefits (including cars and compensation of costs for In certain cases, any employee is entitled to financial aid. Such their usage, mobile communication with a high spending limit, aid is provided with no preliminary conditions. MTS makes ad- and compensations of relocation for work in another region) are ditional payments in addition to the standard statutory benefits provided irrespective of the work time duration or contract term. for temporary disability because of illness and industrial accident The benefits are given on the basis of the needs of the service. or occupational disease, in the period of maternity leave, etc. In some cases the Company pays the housing rent. MTS also com- Social benefits (including voluntary medical insurance (VMI) and pensates for relocation expenses, thus supporting the employees’ health and accident insurance, additional payment for the sick wish to migrate and develop. list, financial aid) are given to all employees at their principal place of work except the employees hired under term labor con- In addition to the above compensations and benefits, the MTS tracts for periods of less than three months or working for less employees are given opportunities for living a healthy life and than one third of the standard work time. going in for sports. All employees can take part in such events, as bike trips, sports competitions, days of health. Compensations The temporary disability-related additional payments are made for visits to swimming pools, fitness clubs or an opportunity to regardless of the length of service in the Company, they do not visit gyms and swimming pools rented by the Company can be depend on the work time or contract term. received by the employees who have been with the Company for a certain period of time.

2015 Sustainable Development Report 105 «Benefit Cafeteria»

Starting from the end of 2014, the pilot project of the benefits or services (the Foodcard or MTS shop certifi- Benefit Cafeteria program was implemented in MTS. cate) which were more useful for them. The pilot pro- Under this program the MTS employees were allowed ject was found to be a success and, starting from July 1, to abandon one or two guaranteed benefits (sports 2015, the program was increased up to 30 cities/towns program, voluntary medical insurance) and select other of MTS-Russia, including all Macro-Regional centers.

The benefits are not region-different except that an additional Besides, employees are allowed to take part in the Benefit Caf- compensation to reimburse for the cost of travel to the vacation eteria program where based on employee’s individual decision destination is given in the Extreme North regions and equated his set of benefits may be changed. Such an approach enables areas. to qualitatively satisfy varying employees’ needs with high cost effectiveness.

Medical service

MTS gives additional social protection to all employees by provid- cal aid in state-of-the-art clinics. The voluntary medical insurance ing them with medical insurance and accident insurance. Every program covers the costs of ambulatory medicine, dental care, year we conclude voluntary medical insurance contracts with doctor calling and residential treatment. insurance companies, which enable our employees to get medi-

Corporate pension fund scheme

We strive not only to provide for the present-day needs of our State Pension Foundation established with MTS participation in employees, but we also take care of their confident future. Pur- 2000. Our employees can expect to receive a non-state supple- suing the state pension reform, the Company is implementing a mentary pension under the state program. As to supplementary project of transferring the accumulative component of the labor corporate pension fund schemes, they were not implemented at pension from the RF Pension Foundation to the Sistema Non- MTS.

The 2015 Group costs of providing the personnel with social guarantees totaled RUB 828.7 mln, of which RUB 639.6 mln was voluntary medical insurance expenditures.

106 4.3. Motivation and Social Guarantees 4.4. Personnel Development and Training

The high-quality and timely training of employees forms the basis of G4-LA9 MTS personnel development. We invest tremendous efforts in the G4-DMA career enhancement and education of the Company’s employees.

MTS applies a system training model which is based on Com- • timeliness (assessment of times of execution of processes, pany’s strategic objectives and human resources management times of processing of documents, requests, applications, objectives. The training system is also based on corporate values etc.) – 84.4%; SIMPLE of MTS Group and requirements for employees’ profes sional knowledge and skills. • client orientation (assessment of reply politeness and benev- olence of question answering, problem solution proposal) – The main task of corporate training in the Company is to assure 85.2%; overall development of employees based on the MTS key competences, generate required knowledge, skills and attitudes • quality (assessment of service compliance with the Client’s required for employees and managers for raising efficiency at business needs) – 85.6%. the existing position, create a tool for development of candidates pool and successors to key positions, assure succession of unique Also, according to AoN Hewitt’s poll, the 2014 level of involve- knowledge and experience. ment by the factor “Training and Development” was 77%, as compared with the 2014 figure of 71%. In 2015, MTS conducted a survey to assess the activity of the HR Management Unit, which confirmed a high level in respect to the factor “Training and Development”:

Our 2015 training hour figure was 38 hours of training per The total number of the trained employees was about employee. 209,000 man-courses. 38 209,000 hours/employee man-courses

2015 Sustainable Development Report 107 Corporate university

The Company operates a Corporate University that sets the training standards and coordinates personnel training and development processes. Goals of the Corporate University also include building training systems for various functional divisions of the company. The mission of the Corporate University is to create development opportunities expanding people and business borders, for MTS confident future.

In 2015, the MTS Corporate University revised the strategy of dis- gram or the employee himself/herself submits his/her application. tance training of the Company’s employees. To form its basis, we The application can be submitted into one of the categories only. took the world’s best practices, focuses and subjects, proceeding Traditionally the program involves 4% of the total personnel of the from the analytical reviews of the past periods and from business Company/Unit/region, the successors accounting for 15%, Hi-Pos, requests. As a result, we developed an entirely new concept for for 65%, Hi-Pros, for 20%. launching the Virtual Academy training platform. In January 2016, the system was successfully launched. From September 2014 to March 2016, 42 successors and 109 Hi-Pos occupied new positions. In April 2016, we started selecting employees for participation in the new, 2016–2018, program cycle. Talent management comprehensive development program Functional academies of the Company The program differentiates three categories: manager successors, high-potential (Hi-Po) employees) and highly professional (Hi-Pro) • Client Service Academy for the client service employees; unique-knowledge employees. A specific development plan has been prepared for each of the categories. • Business Sales Academy for the employees engaged in product and service sales to corporate clients; Based on the annual performance assessment findings, the immedi- ate superior recommends the employee for participation in the pro-

«Virtual Academy»

In 2015, we worked on developing the Virtual Acad- Furthermore, the system has a social network of its emy – an unique platform for individual personnel own, where everybody can share his/her professional development. It is a training environment which com- knowledge or useful information. bines all training formats: full-time training, distance training and external training. The Virtual Academy makes available a comprehensive library of the video courses developed specifically In the Virtual Academy, the employees can find a for our company’s employees with the use of the ready-made training program for professional and world’s best training practices. They are conveniently personal growth, register, in just one click, for the classified to enable everybody to select his/her way of training events of interest to them and recommend development on his/her own. Marketing, communica- the courses they liked to their colleagues. tions, leadership, IT, health life-style, stress management – it is an incomplete list of the subjects available The managers have an opportunity to develop an to the MTS employees. The course authors revise their individual employee development plan, assign ready- trainings, add multimedia materials, interactive texts made programs to their teams and keep track of their specifically for MTS, thus producing a complete course academic progress. consisting of small modules.

The plan for 2016 is to develop the platform’s narrow content for various target groups.

108 4.4. Personnel Development and Training Personnel training and career enhancement tasks

Training

Integration training for Development Professional new employees and for of managerial Candidate training qualification everybody in the case competencies of enhancement of introduction of new managers regulation/process

Personnel training and career enhancement forms

Training

full-time on-job trainings, distance training top managers’ master classes training workshops

communication of goals training theoretical efficiency mentoring discussion of and strategy follow-up courses assessment system key projects to employees

2015 Sustainable Development Report 109 • Coach Mastery Academy for development of the MTS Group Starting from 2014, the Company coaches. The Academy is focused on professional develop- operates the Woman in Business ment of the corporate and staff coaches of the MTS Group Club focused on supporting fe- and translation of the uniform philosophy/policy/principles male managers. The club meet- of training in the Company; ings are held bimonthly in two formats: face-to-face format and • Leadership Academy for high-potential employees of the MTS Group. The Academy’s key tasks are to develop the distance format. management and communication skills in high-potential specialists; The detailed form and method description is set forth in • HR Academy for the HR Management Unit employees; the Our Employees section of the 2015 Annual Report.

• iMBA for employees in the remote regions. According to the 2015 Corporate University results, all KPI targets were met. The total number of the trained employees was about Personnel training and career enhancement is of following three 209,000 man-courses. types: internal training, external training and self-education. Depending on the existing goals and tasks, various forms and methods of training can be selected.

G4-LA9 Number of training days per employee Number of trained employees of MTS PJSC, man- courses

+70% Training type 2013 2014 2015

Internal training 33,926 44,391 40,048 2.7 2.8 4.75 External training 4 415 10,230 12,947

Distance training (SDTO + 92,199 76,920 155,924 webinars)

2013 2014 2015

Leadership Academy

The Leadership Academy project was launched team will go for internship in a foreign telecom 3 years ago. Starting from 2014, the Academies company. were launched all over the country and more than 150 employees entered them. The program is in- Currently, the program is conducted in all of the Mac- tended for devloping high-potential employees of ro-regions of Russia. The total number of participants the MTS Group and combines engrossing training is 220 persons, including the employees of the Retail and work in cross-functional teams on the projects chain of MTS and MGTSD. In 2015, the project was which are important for our business. The winning launched in Armenia and Turkmenistan.

110 4.4. Personnel Development and Training Internal Training

Internal training is conducted by the following two departments: Facilitation • Training Program Department, which is responsible for is intragroup interaction easement, which makes management of internal training with the use of our own it possible to organize discussion and radically resources (development of soft-skills programs, training of improve the quality of the decisions made. internal coaches). The 2015 number of trainees was 40,408; the number of full-time courses was 551. Facilitation session • Training and Development Department, which develops is a highly structured meeting whose participants and implements comprehensive development programs for walk through the predefined process steps to the Talent Management program participants (more than arrive at the result produced, understood and 800 persons), for the managers (more than 300 persons), accepted by the entire team. develops mentoring and coaching, nonstandard training formats (the orators’ club having more than 300 members, the women’s club having more than 150 members, the book club having more than 200 members). In 2015, 173 coaches were trained under the Coach Mastery In the reporting period we increased the number of internal pro- Academy, the internal coach training program. grams and distance courses, got more leadership, performance management, team management programs. Furthermore, the MTS staff coaches were given team-building and facilitation technologies, which radically changed the ap- Distance Personnel Testing and Training System (SDTO) is gaining proach to work with internal clients, enriched the set of coach- momentum. 282 new courses were added to the Distance ing tools and made it possible to develop the personnel more Personnel Testing and Training System, including videos of efficiently and effectively. webinars/video courses, etc. (3 times more than in 2014); each employee completed more than four courses in the SDTO system; In 2015, the “MTS Manager’s Rules” were developed for the MTS in total 55,924 employees received training. 134 webinars were managers, which include the basic principles of management in held, the number of viewings was over 27,000. Selection of inter- the Company, a program was conducted to instruct in these rules, esting and urgent subjects for the employees, active participation 50% of the Company’s managers received full-time training. of the Top-Team in webinars drew the employees’ attention to Feedback workshops became popular as part of preparation for the online trainings. The webinar popularity grew threefold. annual performance assessment. A stable tendency of preparation of mixed modular programs (supplementation of full-time trainings with online courses and webinars) emerged.

English club

Starting from 2014, the English club functioned in the instruction in that the Clum members do not use text- CC. In 2015, the employees began studying English in books and do not delve into grammar. The club aims this format in all of the Macro-regions. primarily at developing the conversational skills of the people who have already got a stable knowledge base The meetings are held with the participation of the but who do not have sufficient language practice and foreign teachers from the USA, Canada and United who have to overcome the language barrier. Kingdom. This format differs from standard language

2015 Sustainable Development Report 111 Distance courses

The Corporate University Department has developed a new On the average, it takes about an hour to accomplish a course. distance course format. Now the courses on popular subjects The content is split into parts of 10 to 15 minutes, each part will be available in the video format. The user will be able to covering a certain aspect of the subject, containing tests and download the video to his/her mobile gadget and view the homework assignments. Such lessons can be watched during record at convenient time, download presentations and other the week to prevent the training from interfering with the supplementary materials and listen to an audio version of the official duties. Some courses are grouped into subject lines by course. The trainings enhance professional skills and improve the complexity level. After the complete course is studied and personality. the final test is passed, the employee gets a certificate from the MTS Corporate University. The course library has both video lessons on marketing, Big Data sales and the materials on emotional intelligence development, profiling and principles of healthy nutrition.

Retail chain training

The On-Job Development pilot project has been launched in pilot and by comparing the employee’s professional knowledge. the MTS regional chain. The project time-frame was October The pilot demonstrated positive trends in respect to the employ- 2015 – March 2016. Under the project, the office managers and ees’ churn decrease and professional growth. head of office chains were taught to develop professional skills of their teams directly in working situations, to give feedback Since this work was found to be important and necessary, it was to their subordinates and plan development steps. The coaches decided to introduce these tools throughout the chain. In 2016, trained the managers at trainings and followed them on in field the project is expected to be throughout the chain and all man- work. The participants used specially developed methodological agers of the operational divisions and sectors will be required materials and correlated the professional growth results with the to use the MTS regional chain’s mentoring tools. To enable the business indicators. managers to use these tools properly, the Company’s coaches conduct specialized management development programs. The pilot effectiveness was assessed by comparing the staff turnover with the figures for the operational divisions outside the

112 4.4. Personnel Development and Training External training

In 2015, more than 500 external training programs were used in the Company.

2015 biggest external training programs

New programs: Old programs:

• Target project to train the employees of the newly estab- • Master Program of MTS and the Higher School of Man- lished division (UFLNCC) in the Volga Macro‑Region (Nizhny agement of Innovations of the Lomonosov Moscow State Novgorod) of the Fixed-Line Network Service Department; University. It is an unique training program as it combines a fundamental theoretical basis and active training forms • Program of training of Finance and Investment Unit, includ- (solution of business cases, conduct of practical trainings, ing the employees of the United Service Center (International workshops and business games); Accounting Standards– the basic and advanced courses – and practical skills of their use); • English language study program (2 formats – the distance format and face-to-face format: group classes, conversational • Teradata SQL training program for the employees of the Com- clubs). munication Marketing Unit, implemented due to transition to Teradata, a new analytical DBMS;

• MBTI-Based Business Communication regional manager training program.

New external training programs planned to be launched in 2016

• Program for development of and information & consulting • Training of the IT Unit employees administering the Corpo- support to the BigData Team (employees of the IT Unit and rate Center’s hardware/software systems to use the Genesis Marketing Unit) and the IT Team evolving new approaches to software platform; elaboration of our own IT solutions (From Waterfall to Agile IT transformation project ); • Use of a mixed format to train the UNCC Technical Unit in collaboration with Huawei.

2015 Sustainable Development Report 113 4.5. Staff Recruitment and Adaptation

MTS is continuously improving the HR selection tools, striving to hire the highest-class specialists and promising candidates. We are sure that only successful professionals are able to attain the Company’s strategic objectives.

MTS operates a career portal rabota.mts.ru for job seekers, and development of its own staff. In the appointment, we must which presents the information on development, career ladders, be certain that the person fits the position profile and will be corporate culture of the MTS Group. It also provides the informa- able to achieve significant results in their work. The recruitment tion on various vacant positions: both for novices and for experts process at the Company is transparent to the greatest extent and managers. Any job-seeker who wishes to become employed possible. The contest for the vacancy is open for both internal in MTS, can respond to the vacancy of interest to him/her in the and external candidates. All information relating to a career at convenient format. the Company, candidate requirements and the list of vacancies is available in the “Career” section of the official MTS website MTS seeks to recruit the best professionals in the market. In addi- (www.company.mts.ru/career). tion, the Company invests considerable amounts in the training

Recruitment of young professionals

The site rabota.ssl.mts.ru has a special section devoted to the participation in debates, master classes from MTS executives and information on “Work for the Young”. It contains the informa- joint projects with business schools. tion on vacancies and internships for young specialists, interns’ and employees’ success stories, the “MTS Success School” and MTS provides students and young professionals with the oppor- provides a feedback channel. tunity to go through summer internships and practical training in various departments of the Company. In total, in the context MTS is a young Company, in which more than half of all employ- of internship, the Company cooperates with more than 50 higher ees have not yet reached 30 years of age. Every year, thousands educational institutions of Russia. The program lasts for two of young people join our team, many of whom were students months or more, during which a trainee works with a mentor. yesterday. The Company maintains an active dialog with young A newcomer performs certain business functions and is engaged talents, preferring instead of the trivial approach the non-stand- under a specific project, where he is really needed. ard, innovative methods of communication, including business games at Russia’s leading universities, personal growth courses,

114 4.5. Staff Recruitment and Adaptation “Knowledge Festival”

On November 14, the first large-scale educational event called the “Knowledge Festival” was held. All of the MTS employees who wished to “replenish their knowledge bank” has a change to spend their off day usefully and informally socialize with their colleagues. the event was attended by guests – colleagues from MTS Bank, Medsi, Detsky Mir (Children’s World), MTS Retail Chain, MGTS and other companies. The participants could select among interesting lectures by invited experts and business coaches, grouped into four subject units – “Self-Development”, “Health”, “Science and Technologies”, “Parents and Children” or hone their practical skills at master classes.

Adaptation of new employees

A special adaptation system has been developed for newcomers to the Company. In their first working day the novices are given the Welcome to MTS employee guide, which provides answers to the basic questions which may arise in the first days of work, as well as badges and stationery bearing the MTS logo.

All new MTS employees must take integrative courses: the novices. Then the HR Department reviews the new employees’ opinions on the adaptation process. As to the newcomers to • “Introduction to MTS” – a basic training course for new the “Sales and Subscriber Service” division, they are supported by employees to introduce them to the Company’s business the mentoring system. principles, history, organizational and corporate culture; The MTS retail chain also has the Mentoring project. Essentially, • “Introduction to GSM” – an ABC for each MTS employee, it consists in that each experienced employee can become a men- which contains engrossing lessons making it possible to learn tor for a less experienced one regardless of his/her position. For everything about mobile communication. example a specialist trains his/her assistant to take the specialist position, a sales office manager trains a specialist to become a The novices go through introduction to position, planning of sales office manager, etc. Direct interaction of the employees adaptation and the probation period. After the probation period continues during further work. In 2015, we updated the mentor- is over, the managers assess the performance of each employee ing program to increase the level of knowledge of new and old and, in their turn, they receive the comments and proposals from employees.

2015 Sustainable Development Report 115 G4-DMA 4.6. Occupational Health & Safety

MTS endeavors to ensure comfortable and safe working conditions for its employees. Personnel safety is the main component of corporate social responsibility of the Company. In the field of occupational health and safety MTS is guided by the laws of the Russian Federation, as well as international law and local regulations.

The Company operates a three-tier system of OSH management, In January 2016, the analysis of the implementation focused on creating a safe working environment, prevention of of the planned activities on labor protection in the occupational injuries and personnel training of safe work rules. past year was performed. In total, MTS PJSC spent Labor protection activities carried out by MTS PJSC focus on: RUB 74.1 mln on labor protection measures in 2015 (in 2014 — RUB 66.5 mln). • Ensuring the priority of preserving life and health in the workplace; In 2015 18,366 persons underwent external and internal health and safety training. Employees trained on health and safety are • Improving of the OSH management system; managers, experts, members of commissions on health and safety and other categories of employees. Various training systems • Timely training of managers and specialists on labor protec- are used for internal training on health and safety, including a tion; remote health and safety training system of the MTS Corporate University. The Company provides training on first aid to persons • Organization of preventive and regular medical checks of injured at the production facility. First aid is a complex of actions employees; focused on recovery or preservation of life and health of the injured. The main objective of training is practice of independent • Timely provision of employees with special clothing, foot actions and behaviour of employees focused on preserving life of wear and other personal protective equipment; every injured, before arrival of rescue services.

• Organization of the production control and evaluation of the One of the major trends in the prevention of occupational inju special conditions of employment; ries and diseases is a special assessment of working conditions. This process allows to fully identify and objectively evaluate the • Ensuring the safety of production equipment and processes; harmful and (or) dangerous production factors and risks in the workplace, to plan the activities to improve working conditions. • Accounting and analysis of occupational injuries, organiza- As of December 31, 2015, 20,525 workplaces (85% of the total tion of investigation of accidents and activities to prevent quantity of workplaces) have been estimated in MTS Corporate occupational injuries and diseases; Center and MTS PJSC Macro-regions, in 2016, special assessment of working conditions will continue. More information in the • Providing units with regulations, communicating the laws assessment findings is available on the site www.company.mts. and regulations on labor protection to the employees; ru/comp/social_responsibility/ocenka.

• Promotion of occupational safety and health issues. Personal protective equipment (PPE) plays an important role in the prevention of employee’s direct exposure to harmful and

116 4.6. Occupational Health & Safety (or) hazardous production factors. MTS developed and approved tions and protection of labor of the Employees, whose workpla norms of free issue of special clothing, footwear and other per ces were put to special assessment of working conditions. sonal protective equipment to workers who are engaged in work with harmful and (or) dangerous working conditions. Timely In 2015, six minor accidents and one severe accident occurred G4-LA5 procurement of certified PPE is provided, deadlines of wearing within MTS PJSC. It should be noted that 71% of accidents are and testing of personal protective equipment are met. Properly due to falls of the injured as a result of personal carelessness, G4-LA6 organized safekeeping of PPE is ensured. and 29% are due to road traffic accidents. Rate of occupational injury, which is characterized by a frequency rate of accidents, MTS employees engaged in work with harmful and (or) dange was 0.17, for comparison, in “Communication” industry it was rous working conditions undergo preventive (at employment) 1.56. The accident severity rate was 16.28. and periodic (during work) medical examinations. The purpose of the periodic medical examination is a dynamic monitoring of The 2015 occupational injury and working time loss rate was 0.03 the employee’s health in the workplace, prevention and timely and the lost day rate (LDR) was 0.49. The workplace absentee rate establishment of the signs of occupational and general diseases, (AR) was 5.51. In 2015, no occupational diseases were diagnosed and prevention of accidents. During the reporting period, MTS and no fatal accidents took place. held preventive and periodic medical examinations of 2,989 and 8,758 employees, respectively. As a result of periodic medical Vehicle drivers and technical specialists (work at height, work G4-LA7 examinations, 20 employees needed to be transferred to another inside electric installations), which serve the communication net- job, and health resort treatment was recommended to 273 work, belong to the category of high-injury workers. The health employees. and safety issues are not covered in the official agreements with trade unions since such agreements do not exist. Particular attention is paid to the organization of MTS activities to prevent occupational injuries and diseases, to carry out preventa- Annually MTS cooperates with the Social Insurance Fund of tive measures to manage occupational risks. For this purpose, the Russian Federation (RF SIF) for financial support of preven- various organizational and technical measures have been imple tive measures to reduce accident injury rate and occupational mented for accidents prevention. diseases of employees and health resort treatment of employees working with hazardous and (or) dangerous production factors, MTS has no official joint health and safety committees. The as well as to obtain discounts on insurance tariff for compulsory division managers of employees’ representatives participate in social insurance against industrial accidents and occupational monitoring and development of annual Plans of Labor Protection diseases. In 2015 the total amount received from this work made in Macro-Regions and Regions for the forthcoming year (10%) 9.6 M RUB (in 2014 - 9.5 M RUB). and in development of the List of measures to improve condi-

Number of accidents in MTS Accident Frequency Rate

0.19 0.13 0.17 7 5 7

6 5 6 1 0 1 2013 2014 2015 2013 2014 2015

Minor

Severe

2015 Sustainable Development Report 117 Using the funds of the Social Insurance Fund of the Russian tion Week in Sochi. The busy schedule of the All-Russian Labor Federation: Protection Week made it possible to participate in professional discussions, to study best practices and experience of colleagues, • medical examinations were performed; to learn about the main directions of labor protection law improvement, to get recommendations and answers to practical • overalls, safety shoes and other PPE were purchased; questions.

• special assessment of labor conditions was made; In order to motivate macro-regions and regions to achieve high indicators in the field of labor protection, in 2015 the review con- • health resort treatment was organized for MTS employees. test was held on labor protection for best labor conditions and protection among macro-regions of MTS. Activities of macro-re- OSH management system in MTS has been recognized at the gions and regions were assessed by 20 indicators. Winners of the regional and district levels. In 2015, a number of MTS branches review contest were: Branch of MTS in Altai Territory, macro-re- became winners of city and regional contests for labor protec- gion “Siberia”; Branch of MTS PJSC in Smolensk, macro-region tion. “Centre”; macro-region “Moscow”. Two branches of MTS PJSC got the “Employer’s Trust Certificate”. A lot of attention is paid to promotion of labor protection issues, various forms of operation are used. Every year in April, in antic- Every year the Company assesses the effectiveness of OSH ipation of the Global Labor Protection Day, various actions are management system based on quantitative indicators that taken to improve the labor conditions and protection of the Com- objectively assess the degree of implementation of the labor pany employees, to prevent occupational injuries and diseases. policy. Assessment is carried out for each region. As a result of evaluating the OSH management system effectiveness, the ana In the reporting year, the representatives of MTS and subsidiaries lysis is performed, concrete measures on improvement of labor participated in the work of the first All-Russian Labor Protec- protection are planned.

118 4.6. Occupational Health & Safety 4.7. Physical Culture and Sport

The Company continues to support the desire of its employees to lead a healthy life. MTS has corporate football, basketball and volleyball teams. The Company’s personnel can participate in corporate competitions together with the members of their families and to take football, basketball, volleyball, swimming classes. Since the end of 2012, a sport program has been existing for the MTS employees, under which, depending on the region, the Company either leases swimming pool lanes so that its employees can go in for sports or compensates for subscriptions.

Every year the MTS Group holds sports competitions at the regional and federal levels to select the best sportsmen for participation in the Summer Sports Festival (Spartakiada Games) of the JSFC Sistema. MTS has been taking part in the Spartakiada Games for 13 years, customarily taking the prize places.

The Company holds the regular Mini-Football Cup of the MTS Group, the Health Day (a family sports festival), an annual beach volleyball tournament in Macro-Region “Siberia”, a tourist jambo- ree in Macro-Region “South”. Bowling, volleyball, chess, karting and table tennis tournaments are conducted. Also, regional Spartakiada Games and championships in football and other sports are held.

In 2015, the 8th Mini-Football Cup of the MTS Group was held in the Olympic Sochi. The tournament was the most representative as compared with the previous ones since it was an arena for 14 teams from Russia, Armenia, Belarus, Turkmenistan and Uzbeki- stan. It was won by the Belarus team who won the MTS Cup for the sixth time.

In 2015, the MTS employees took part in Spartakiada Games program and swimming, basketball, volleyball, football, table tennis, billiards, chess and karting sports events.

2015 Sustainable Development Report 119 Responsible 5. Business

5.1. Shareholder Structure...... 122 5.2. Corporate Governance...... 124 5.3. Risk Management...... 136 5.4. Compliance and Business Ethics...... 137 5.5. Transparent Procurement Procedures...... 145 5.6. Information Disclosure...... 149

5.1. Shareholder Structure

Shareholder capital structure

The Company’s majority shareholder is Sistema PJSFC, which tems Bermuda Limited (100% MTS subsidiary) were transferred owns 51.46% of the mobile operator’s shares as at December 31, to a treasury account of MTS PJSC as part of asset distribution 2015. during liquidation of Mobile TeleSystems Bermuda Limited.

G4-13 During the 1st quarter of 2016, the shareholder capital structure Detailed information on the shares and shareholder capi- of the Company was changed. On March 17, 2016, 67,995,335 tal structure of MTS PJSC is available in the Annual Report ordinary shares in the form of 33,997,667 ADRs (3.29% of MTS for 2015, Section “Capital and Securities”. authorized capital) which previously belonged to Mobile TeleSys-

Shareholder capital structure of MTS PJSC as of December 31, 20151

MTS PJSC 0.001%

Sistema PJSFC 51.46%

MGTS PJSC 0.46% Shares in free circulation 44.79% MOBILE TELESYSTEMS BERMUDA Ltd 3.29%

1 The ownership interest of JSFC Sistema OJSC includes ownership interests of its following subsidiaries: LLC Sistema Telecom Assets (10.67% of shares of MTS PJSC) and Sistema Finance S.A. (10.00% of shares of PJSC MTS) Vladimir Petrovitch Evtushenkov is a controlling person of JSFC Sistema JSC. MGTS PJSC is a subsidiary of MTS PJSC. 0,001 % of shares bought out by MTS PJSC from shareholders of MTS PJSC as part of the obligatory buy-out procedure due to reorganization of MTS PJSC in the form of take-over of subsidiaries MOBILE TELESYSTEMS BERMUDA Ltd (subsidiary of MTS PJSC) is the owner of ADR for shares of MTS PJSC. Shares in free circulation include 10.46% of shares of MTS PJSC and ADR for 34.33% of shares of MTS PJSC.

122 5.1. Shareholder Structure Dividend Policy

Board of Directors and MTS executives understand that permanent stable dividends are the integral component of the investment appeal of MTS and profitability for the shareholders. Since 2010 MTS has paid in total over RUB 235 billion in annual dividends with average annual growth rate of 12% (at that, annual volume of payment grew by 69% from 2010 to 2015).

Detailed information on dividend policies and payment Dividend payment statistics is available on the Company’s of dividends is available in the Annual Report for 2015, website www.mtsgsm.com/information/dividends. Section “Interaction with Shareholders and Investors”.

Dividend Payments by MTS PJSC, billion RUB For the 2015 calendar year, MTS PJSC paid the record high amount of dividends

41 51.2 52 25.17 RUB per one ordinary share (RUB 50.34 per ADR)

or in total

52 billion RUB 2013 2014 2015

2015 Sustainable Development Report 123 5.2. Corporate Governance

We aim to improve our existing corporate governance system, keep track of its effectiveness, implement the best practices in our business, and follow the provisions of the applicable Corporate Governance Code.

The MTS corporate governance system is based on the clear de- • controllability of the MTS Management Board activities; lineation of the governance bodies’ responsibilities and respect for shareholders’ rights and interests as well as on information • independence of the Board of Directors in definition of the transparency. MTS corporate governance relies on the provisions Company’s strategy, approval of business plans, other impor- of the Russian legislation, but is not limited thereto - we are com- tant decisions; mitted to developing our corporate governance with due regard for global best practices. • centralization of decision-making on the key issues of activities. Key MTS corporate governance principles are: Detailed information on the corporate governance • comprehensive protection of shareholder rights and inter- system is available in the Annual Report of MTS PJSC for ests; 2015.

• transparency of information on the Company’s activities;

124 5.2. Corporate Governance System of MTS PJSC Governance and Control Bodies

Governance bodies1

General meeting of shareholders Higher Governance Body of MTS PJSC. Procedure for the General Shareholders’ Meeting is focused on assurance of adherence to the rights of shareholders, and meets all the requirements of the Russian Federation legislation. Procedure for preparation, convocation, holding and summarizing results of the Gen- eral Shareholders’ meeting is defined by the Charter and Regulation on the General Meeting of MTS PJSC Shareholders.

Board of Directors Board of Directors exercises a general management of MTS PJSC activities. It is a key element of the corporate governance system of the Company, representing interests of shareholders through the effective management organization. Establishment procedure, status, composition, functions, purposes and goals, powers of the Board of Directors, its operating procedure and interaction with other manage ment bodies of the company are determined by the Charter and Regulation on the Board of Directors of MTS PJSC. Board of Directors regularly addresses the issues related with the CSR development, charity and environment.

Management Board Collective executive body of MTS PJSC. It shall organize an effective day-to-day management of current activities of the Com pany, including implementation of decisions taken by the Board of directors within its current competences. Number and identities of the Management Board members shall be approved by the Board of Directors upon a proposal of the President. Management Board Chairman is the President of MTS PJSC. Management Board follows the Charter and the Regulation on Management Board of MTS PJSC in its activities.

President One-person executive body of MTS PJSC. He exercises a day-to-day management of current activities of the Company. Activities of the President shall provide for profitability and competitiveness of the Company, its financial and economic stability, enforcement of rights of the sharehold ers and social guarantees of Company’s employees. Andrei Dubovskov has been the President of MTS PJSC from March 5, 2011. The President governs the Company’s activities in accordance with the Charter and the Regulation on President of MTS PJSC.

1 http://www.mtsgsm.com/about/corporate_governance/statutes/

2015 Sustainable Development Report 125 Internal Control System

Auditing Commission Auditing Commission is a permanent elective body of the Company, exercising peri odic control over the financial and economic activities of the Company, activities of its management bodies and officers. Its activities are regulated by the Charter and the Regulation on Auditing Commission of MTS PJSC.

Internal Control and Audit Unit Internal Control and Audit Unit is an independent structural unit of MTS PJSC, con sisting of: Internal Audit Department, Control Department, Administrative Control Department, and Methodology and Coordination Department. Head of the Internal Control and Audit Unit is the Director for Internal Control and Audit who is functional ly subordinated to the Chairman of the Audit Committee under the Board of Directors of MTS OJSC, and administratively subordinated directly to the President of MTS PJSC. Its activities are regulated by the Regulation on Internal Control and Audit Unit.

Audit Committee under the Board Audit Committee is a collegial deliberative body under the Board of Directors, which of Directors reviews matters related to control of functional efficiency of the risk management and internal control system and reliability of the financial statements of MTS Group, considers candidates and results of inspections of external auditors and ensures preparation of recommendations to the Board of Directors in order to take decisions on such matters.

Auditor Independent estimate of reliability of accounting (financial) statements of the Compa ny. In order to audit and approve the annual financial statements of the Company, the General Meeting of Shareholders shall annually approve the Auditor.

126 5.2. Corporate Governance General Meeting of Shareholders

The General Meeting of Shareholders is the supreme management body of the Company, exercising its activities in accordance with provisions of the Company’s Charter, Regulation on the General Meeting of Sharehold- ers of MTS PJSC1, and the requirements of legislation of the Russian Federation.

Company’s shareholders take part in governance over the official website of the Companywww.mts.ru ( ) at least in 30 (thirty) Company through decisions taken at the general meetings of calendar days before its date. shareholders. Shareholders may exercise a significant influence on business through the voting. In particular, powers of the We are trying to present materials for the General Meeting in a general meeting of shareholders encompass the approval of comprehensible form. That is why we create a special section (mi- annual report and financial statements, distribution of profit, cro-site) dedicated to the Annual General Meeting of Shareholders including payment of dividends, election of key management and where we publish required documents (presentations, document control bodies of the Company, approval of significant deals and comparisons, comments to them, details on candidates) and pro- related-party transactions as well as a number of other important vide an access to the online broadcasting of the Annual Meeting. matters. Detailed information on the General Meeting of Share- holders is available in the Annual Report for 2015, Section Notifying shareholders on holding “Corporate Governance”. of the General Meeting of Shareholders

Shareholders shall be notified on holding of the General Meeting of Shareholders through publication of this information at the

1 www.mtsgsm.com/upload/contents/294/MTS_GSM_Regulations_2015_eng.pdf

2015 Sustainable Development Report 127 MTS PJSC management structure in 2015

Election

Auditing Results of inspections Commission

External Accounting Audit Independent Auditor

Control of decision-making by management bodies Subsidiaries and Affiliates

Control, purpose

Branches Monitoring of operation and Representative Office

128 5.2. Corporate Governance G4-34

General meeting of shareholders

Recommendations

Recommendations Committees under the Board of Directors

Budget Committee Board Audit Committee Functional Remuneration and Nominations Committee of Directors subordination Corporate Governance Committee Strategy Committee Special Committee

Report, preliminary review Internal Control of materials, execution of decisions and Audit Unit

Committees under the President Administrative subordination Committee for products, rates and services Brand and Customer Experience Committee Discipline Committee President Disclosure Committee Risk Committee Job Evaluation Committee Recommendations Committee for Strategic Partnership with Vodafone Investment and Tender Committee Committee for Increasing Involvement Committee for Increasing Efficiency of CC Technical Unit of MTS Group Committee for Modifying ERP Systems of MTS Group Security Committee Committee for MTS Preparation to MNPV INTRODUCTION Management CSR Committee Committee for Management of Single Board Communication Environment in MTS PJSC Manageing Committee Blq Data CC of MTS Group

2015 Sustainable Development Report 129 Board of Directors

MTS PJSC Board of Directors consists of nine persons. The current composition of the Board of Directors was elected at the annual General Shareholders’ Meeting of MTS PJSC on June 25, 2015, and was in effect until the end of 2015 after the election.

New composition of the Board of Directors included Mikhail PJSC1 and correspond to state-of-the-art international practices of Shamolin (President of JSFC Sistema OJSC) and Regina Von corporate governance. The Board of Directors current independ- Flemming (CEO of Axel Springer Russia Publishing House until ent members fully correspond to the criteria of independence October 2015). stipulated both in the Corporate Governance Code and in the Listing Regulations of the Moscow Exchange and NYSE. For the Board of Directors to effectively perform its functions and make informed and reasonable decisions, the number of inde- MTS shareholders can be confident that the Company is managed pendent directors in the Board of Directors is more than one third. by one of the industry best teams having a deep understanding of both the telecommunication sector and the Russian market. Criteria of independence of the Board of Directors’ members are defined in the Regulation on the Board of Directors of MTS

Chairman of the Board of Directors

Chairman of the Board of Directors is responsible for ensuring Two deputy Chairmen of the Board of Directors were elected the effective operation of the Company’s Board of Directors and to provide for an efficient BoD operation, with competences its interaction with the Company’s management bodies as provid- determined for each of them: ed in the Regulation on the Board of Directors. Alexander Gorbunov: strategy, international mergers / acqui During 2015, Ron Sommer performed the functions of the Chair- sitions and partnerships of MTS Group; man of the Board of Directors of MTS PJSC. Vsevolod Rozanov: operational and financial control, man agement of debt and exchange risks of MTS Group.

1 http://www.mtsgsm.com/upload/contents/294/MTS_BoD_Regulations_2015_eng.pdf

In 2015 Ron Sommer ranked among the “Top 25 Chairman of the Board” in the ceremony “Director of the Year 2015” National Awards

130 5.2. Corporate Governance Committees under the Board of Directors

For the purpose of increasing the efficiency of decisions taken rate Governance Committee, Strategy Committee, and Special by the Board of Directors, making a detailed preliminary review Committee of Independent Directors. of the most topical matters and preparing recommendations to that effect, the following committees operated under the Board Each BoD member is also a member of one to three committees. of Directors as of the end of 2015: Budget Committee, Audit Representation of MTS PJSC management in the committees Committee, Remuneration and Nominations Committee, Corpo- allows for a meaningful dialog during the committee meetings.

Evaluation of Board of Directors’ performance

The evaluation of Board of Directors performance acts as an effi- mittee at the Board of Directors made a decision on the need for cient tool of corporate governance development and is focused drafting a new methodology, for which an external consultant on raising efficiency of Board of Directors performance. was engaged.

After adoption of the Code and conduction of the corporate In 2016, self-evaluation of Board of Directors using a new evalua governance audit of MTS in 2015 the Corporate Governance Com tion methodology is planned.

Information on remuneration of Members of the Board of Directors

The procedure and terms of remuneration payment to members shall not exceed USD 200,000, and the total amount of remuner- of the Board of Directors of MTS PJSC are defined in accordance ation shall not exceed USD 500,000. More information on the with the Regulation on remunerations and compensations paid procedure of accrual and payment of remuneration to Board of to members of the Board of Directors of MTS PJSC1. Directors members is available on the Company’s website (www. mtsgsm.com/about/corporate_governance/statutes). Board of Directors members are paid remuneration for their work, and the rate of such remuneration depends directly on In 2015, remunerations paid to Board of Directors the performance of the Board of Directors and results of the members, including compensations related with the Company in general. In addition to the basic compensation, performance of functions of a Board of Directors remuneration for the fulfillment of additional obligations and performance-based bonuses are paid to Board of Directors mem- member, made a total of RUB 71,827,703. bers. Additional obligations include participation in the work of BoD committees. Detailed information on the Board of Directors operations and remuneration paid to BoD members is available Bonus based on performance over the year is paid depending in the Annual Report for 2015, Section “Corporate on the amount of MTS’ capitalization, subject to profit under US Governance”. GAAP standards. At that, year-end bonuses paid to the Directors

1 http://www.mtsgsm.com/upload/contents/328/Statute_on_remunerations_final__eng.pdf

2015 Sustainable Development Report 131 Composition of the Board of Directors as of December 31, 2015

Executive Director

Andrei Dubovskov

President, Chairman of the Board Born in 1966 Board of DIrectors member since June 27, 2011 Citizenship: Russia

CG SC

Independent Directors

Michel Combes Regina Von Flemming

Born in 1962 Born in 1965 Board of Directors member since Board of Directors member since Feb.14, 2013 June 25, 2015 Citizenship: France Citizenship: Germany

AC R&N SpC

Stanley Miller Thomas Holtrop

Born in 1958 Born in 1954 Board of Directors member since Board of Directors member since June 24, 2010 Feb.14, 2013 Citizenship: Belgium Citizenship: Germany

BC AC R&N SC SpC AC R&N CG SpC

132 5.2. Corporate Governance Committees

BC Budget Committee CG Corporate Governance Committee

AC Audit Committee SC Strategy Committee

R&N Remuneration and Nominations Committee SpC Special Committee

Chairman of the Committee

Non-Executive Directors

Ron Sommer Aleksander Gorbunov

Chairman of the Board of Directors Deputy Chairman of the Board of Born in 1949 Directors Board of Directors member since Born in 1967 June 25, 2009 Board of Directors member since Citizenship: Germany Feb. 14, 2013 Citizenship: Russia

BC SC BC SC

Mikhail Shamolin Vsevolod Rozanov

Born in 1970 Deputy Chairman of the Board of Board of Directors member since Directors June 25, 2015 Born in 1971 Citizenship: Russia Board of Directors member since June 27, 2012 Citizenship: Russia

BC CG

2015 Sustainable Development Report 133 President and Management Board of MTS

A key role in implementation of the selected strategy, organization of efficient implementation of resolutions of the Board of Directors, management of current operations of the Company belongs to Executive Bodies of the Company – President (sole executive body) and Management Board (collegial executive body).

Executive bodies are accountable to the Board of Directors and • Ruslan Ibragimov, Vice-President, Corporate and Legal Issues; General Shareholders Meeting. • Alexey Kornya, Vice President, Finance and Investments; During 2015 (from March 5, 2011), Andrei Dubovskov performed the functions of the President of MTS PJSC. • Vasyl Latsanych, Vice President for Marketing;

Management Board members in 2015: • Vadim Savchenko, Vice-President for Sales and Maintenance;

• Andrei Dubovskov, President, Management Board Chairman; • Andrei Smelkov, Vice-president for foreign companies;

• Mikhail Arkhipov, Vice-President, Human Resources; • Andrei Ushatskiy, Vice President, Engineering and IT;

• Kirill Dmitriev, Director, Moscow Macro-Region; • Valery Shorzhin, Vice-President, Procurement and Adminis- tration.

Information about principles and system of remuneration of senior officials

The system of remuneration to senior officials includes elements Remuneration paid to the Management Board mem- of base remuneration and variable premium part: bers in 2015, including cost compensation, premiums and other types of remuneration, made a total of • Base remuneration — monthly official salary; RUB 552,105,349. • Short-term motivation system is an annual premium paid for fulfillment of key performance indicators (“KPI”) fixed in gen- Detailed information on the principles and procedure of eral for the Company for a corresponding reporting period as accrual and payment of remuneration to the Manage- well as for fulfillment of functional individual tasks defined by ment Board members and senior officials is available in the Board of Directors; the Annual Report for 2015, Section “Corporate Govern- ance”. • The long-term material incentive program is focused on increasing the Company’s shareholder value as well as pre serving long-term labor and corporate relations between the Company and its management.

134 5.2. Corporate Governance Corporate Governance Development

We consider corporate governance as a condition of sustainable development and element of company’s investment attractiveness. Thus, we are interested, above all, in qualitative corporate governance and build it not only based on requirements of legislation but also take into account recommendations of the Corporate Governance Code as well as Russian and foreign corporate governance practices.

In 2015, we continued the work on development of our corpo- In the reporting period, we also introduced a new institute of rate governance system. The audit of the Company’s corporate anti-monopoly compliance, new for Russian practices of corpo- governance completed at the start of 2015 confirmed the high rate governance. level of corporate governance and degree of compliance with the principles and recommendations of the Corporate Governance Details on implementation of the system see in Sec- Code. tion 5.4. Compliance and Business Ethics.

Following the audit results we approved the Roadmap for im We positively assess the results we managed to achieve, however plementation of Code recommendations in MTS, and started its we do not settle for them. We strive to continuously improve our enforcement. Most of the Roadmap activities were done by the corporate governance in view of the experience and practices end of 2015. The report on compliance with the principles and in the market, listing regulations and legislation changes. That recommendations of the Corporate Governance Code is available is why our main goal for the next year is to continue implemen- in the Annex to the Annual Report for 2015. tation of Roadmap activities with regard to changing regulatory environment.

2015 Sustainable Development Report 135 5.3. Risk Management

As of today, an efficiently operating risk management and inter nal control system focused on assuring reasonable confidence in achievement of objectives set in the Company was established in the Company.

Risk management is carried out in MTS Group within the accept- Notification of the MTS Group management is carried out taking ed conceptual risk management frameworks (document “Com- into account the whole risk spectrum to ensure the complete pany Risk Management. Integrated Model” of the Committee of ness, quality and comparability of the information provided for Sponsoring Organizations of the Treadway Commission (COSO)). each level of decision-making. The integrated risk management process is functioning efficiently in accordance with the needs of the Group and international The Board of Directors within its competence is liable for organ- standards. Risk management policy aims to minimize unexpect- ization of the risk management and internal control system in ed losses from risks and to maximize capitalization, taking into the Company, including approved reports of Company’s executive account the relation between risk and return of investments ac- bodies on efficiency of the risk management system, efficiency ceptable to the shareholders and the management of MTS Group. of the Company’s internal control system, including compliance system. Risk Management Department of the Corporate Centre (RMD CC) assesses the most significant risks on the basis of long-term The Board of Directors is liable for efficiency of the risk manage financial model and regularly conducts simulations for obtain ment process, for building and maintaining of the Company’s ing key financial indicators considering the risk and probability risk management and internal control system; annually reviews distributions of these indicators. RMD CC applies econometric a report of the Audit Committee based on annual results with techniques for the analysis of individual risks. analysis of current control systems and discovered violations.

A report on the status of the MTS Group risks is reviewed quarter Detailed information is available in the Annual Report, ly by the Risk Committee, which discusses the key company risks Section “Risk Management and Internal Control System”. and makes collective decision on the elaboration of measures for their mitigation.

136 5.3. Risk Management 5.4. Compliance and Business Ethics

Compliance

The leading position of our Company in the market is largely The compliance system in MTS PJSC sets forth measures focused determined by the size and scope of its activities, dynamic devel- on regulatory risk management, improving corporate culture of opment and continuous differentiation of products and services the Company, implementing and developing in the Company best for subscribers. Today, however, it takes more than just seeking corporate governance practices as well as standards of responsi to improve investment and operating efficiency to be a successful ble business conduct relying on norms of applicable legislation, company. Prominence of our Company obliges us to support its recommendations of regulatory bodies, industrial specifics and reputation in a best possible way as a socially responsible organ- best practices in this area. ization for the state, our subscribers, shareholders, partners, and all stakeholders and the public. MTS for several years has been The compliance function is responsible for the preparation and developing the corporate system of compliance with require- implementation of the anti-corruption compliance program, con- ments of applicable legislation and business ethics – compliance. flict of interests management and update of the Code of Business Conduct and Ethics. The Company adheres to principles of compliance with requirements of applicable anti-corruption legislation1 and business MTS PJSC introduced the position of the Director of the Compli- ethics in all business relations and irrespective of a world coun- ance Department who is directly accountable to the President of try, in which the Company performs its business activities. The MTS and responsible for the creation and implementation of full Company fixed the principle of non-acceptance of corruption in compliance functions within MTS and its subsidiaries. any forms and occurrences both in everyday activities and when implementing strategic projects.

1 Anti-corruption legislation of countries, on the territory of which the Company performs its activities, Foreign Corrupt Practices Act 1977, The Bribery Act 2010.

October 23, 2015 marked the Company’s first-ever corporate Ethics and Compliance Day. The employees from the regions across Russia participated in on-site and remote training sessions organized by the specialists of Macro-Regions Compliance Department and received answers to the questions of their interest in ethics and compliance.

2015 Sustainable Development Report 137 G4-56 Regulatory Documents:

• The Code of Business Conduct and Ethics (www.mtsgsm. The Code applies to the Board of Directors members, senior com/about/compliance/corporate_conduct) management and all employees. All employees are responsible for compliance with the Code and are personally The Code of Business Conduct and Ethics (hereinafter, the responsible for their actions. The business conduct and ethics Code) was updated in 2015. standards set forth in the Code also apply to all the companies which are part of MTS Group. The Code should be regarded as a document containing a minimum set of standards and requirements adopted by • Anti-Corruption Laws Compliance Policy (www.mtsgsm. the Company in order to promote fair and ethical business com/about/compliance/policy) applies to all employees and practices and to prevent abuse. The Code defines the rules senior management of the Company and is a must-know for and standards that should be followed by the employees in all new employees. their everyday work. In cases requiring application of higher standards than the accepted commercial practice, or regula- • Conflict of Interests Management Policyapplies to all tions having greater legal force under the current legislation, employees and senior management of the Company and MTS will use such higher standards. is a must-know for all new employees. The document was substantially updated in 2015. In particular, the term “close The Code of MTS PJSC covers such topics as MTS and Employ- relatives” was further defined, the principles of conflict of ees, MTS and Clients, MTS and the Society, MTS and Laws, interests management supplemented with new ones such Feedback on the Code Violations, which formalize our re- as a collective nature and deliberativeness with the proce- sponsibility before our employees, subscribers, shareholders, dure for their implementation described. Recommendations partners and all parties concerned, and the public. The Code contained in the Bank of Russia’s Letter “On the Corporate is amended when and as necessary. Governance Code” of April 10, 2014 were taken into account. Also, the new annex citing the examples of conflicts of interests and best options for their settlement was prepared.

Compliance System Core Elements

• Company’s management actively demonstrates its commit • The Company exercises monitoring of efficiency of imple ment to compliance principles as well as supports efforts for mented procedures for corruption prevention, monitors implementation and assurance of operation of the corporate compliance and, if required, improves them. compliance system (tone from the top). • The Company established criteria for defining the need for in- • The Company regularly conducts measures for discovery and clusion of an anti-corruption clause in the text of a contract, subsequent updating of corruption risks paying special atten- which take into consideration the risk level both depending tion to risks specific for its activities, regions of operations as on contract party category and on the type of established well as potentially vulnerable business-processes. relationships.

• The Company develops and implements anti-corruption • For the purposes of minimization of the risk of Company’s in procedures reasonably and proportionally meeting the level volvement in corrupt practices, the Company developed due and nature of discovered risks. diligence procedures both in respect of contract parties – le gal entities (including members of joint ventures, companies • The Company implements and maintains the program of or associations) and in respect of individuals with whom the training of its employees and members of management bod- Company plans to enter into a labor contract or a civil law ies in principles and standards of compliance with applicable contract. The due diligence procedure is also applied if the anti-corruption legislation by means of a specially developed Company acquires a stake in some legal entities. training system. The Company by means of informing and training contributes to the increase of the level of corporate • The Company established the procedure for preliminary culture, awareness of anti-corruption and business ethics control as well as the reporting system and subsequent issues. analysis of the most risky transactions in terms of compli ance, including, but not limited to, in the area of granting, implementation of representation expenses, organization

138 5.4. Compliance and Business Ethics of measures, corporate social responsibility, procurement, • The Company operates a single hotline (the line of the marketing, sales, M&A transactions etc. internal control and audit unit [email protected]) for the employees to notify of noncompliance with the MTS PJSC • As part of internal control procedures the Company conducts Compliance with Anti-Corruption Legislation and Conflict inspections of the discipline of execution of the established of Interests Management Policies. When sending messages procedure for implementation of business processes, includ to the single hotline, employees may not specify their data ing inspections of lawfulness of executed transactions with (e-mail) for feedback. Bona-fide claimants are provided by the Company’s assets. Company with protection from any forms of persecution or discrimination.

Informing and Training

The MTS applicable policies are brought to the notice of em- pany’s management is certified for compliance with the Code of ployees when they are employed by the Company and sign an Business Conduct and Ethics and Compliance with Anti-Corrup- employment agreement. Each employee familiarizes himself/ tion Legislation Policy on an annual basis. herself with the binding policies and regulations, including the Compliance with Anti-Corruption Legislation and Conflict of Inter- Contractors familiarize themselves with the MTS Code of Business ests Management Policies, and the Code of Business Conduct and Conduct and Ethics, the Supplier’s Code and the Compliance with Ethics, and signs an acknowledgement form, and all new starters Anti-Corruption Legislation Policy, and, at the stage of delivery (100%) are therefore kept informed. of tender documents, sign a certificate whereby they agree to observe the requirements of the anti-corruption laws. All members of the governing bodies (included in the Moscow Corporate Center) are informed of the anti-corruption policies The Company has a system of values in place, serving as a basis and methods and regularly attend training sessions. The Com- for the competence model which includes, inter alia, compliance

2385 employees

training sessions

1875 138 37 298 employees employees employees employees

89 functional sessions 2 master classes within “Current trends in anti- trained by the MTS the enlarged Management corruption regulation” — Corporate Center in Board a workshop for the top- subsidiaries and affiliates management and governing bodies’ members by HoganLovells partners

2015 Sustainable Development Report 139 competences since 2014. Along with the accomplishment of cor- updated in 2015 to match with the recent version of the Code, porate KPIs and individual tasks, the level of competence develop- the new course launched for all employees of the Company. ment is taken into account in the performance evaluation of MTS employees. These competences are defined in terms of behavioral indicators which may be observed, measured and developed. E-training

The Company has a compliance training system in place which includes compulsory e-courses and full-time training sessions as Training Program Number of Employees Who well as optional awareness sessions, speeches and participation Completed Training in the Company’s internal conferences on various aspects of compliance for the purpose of keeping employees informed of the 2014 2015 legal requirements and internal policies and procedures binding upon each MTS employee. In the Code of Business Conduct 4,134 10,846 and Ethics E-training consists of two training courses: The Code of Business Conduct and Ethics (launched in 2013) and Compliance with In anti-corruption compliance 5,915 13,101 Anti-Corruption Legislation (launched in 2014), which must be attended by all new employees as well as by the current employees, irrespective of their position, on a bi-annual basis. The Compliance Department together with the Corporate University Department regularly keeps track of timely comple- The Code of Business Conduct is the fundamental training course tion of training by the employees and keeps the Company’s top in compliance with the Company’s rules and requirements, management informed. In 2015, 2,385 persons, including top including anti-corruption requirements. This training course was management, attended training sessions.

Compliance system development results in 2015

The project for the independent performance evaluation of the party auditing for the purpose of its optimisation and imple- MTS PJSC corporate anti-corruption compliance system with the mentation of a risk-oriented approach were drafted, the current involvement of a third party consultant was implemented. The version of the Code of Business Conduct and Ethics of MTS PJSC purpose was to review conformance of the MTS anti-corruption etc. was updated. compliance system to the requirements of applicable anti-corruption legislation and the world best anti-corruption practices. The work towards further development of the culture of bona fide behavior and encouragement of reporting of suspected The project included: violations via hotline calls continued. In particular, the initiative to hold the first corporate Ethics and Compliance Day was imple- • evaluation of the compliance system elements, mented.

• performance analysis of anti-corruption review procedures Regular measurement of the discipline of execution of com- and their implementation, pliance procedures and controls through quarterly monitoring in high risk areas was put in place. The number of violations • availability of framework anti-corruption documents, the tends to decline compared with 2014. During 2015, data of 28 “tone from the top” procedure. situations was checked and reviewed by experts for conflicts of interests (CoI). 7 actual CoIs and 9 potential CoIs were settled. The project of independent evaluation of compliance risks by divisions in their specific business processes (evaluation of “from The work towards the compliance system implementation in the bottom to top”) with methodological support of the Compliance new subsidiaries and affiliates UMS in Uzbekistan continued in Department was implemented. Based on project results the accordance with the plan approved earlier. compliance risk map was updated, control update scheduled for two processes. The procedure for independent evaluation of Active development of compliance systems in subsidiaries and af compliance risks by business divisions will become annual and filiates of MTS continued. The Company pays special attention to will be automated. compliance development in jurisdictions with high country risks. Under the compliance system development strategy in the entire A number of system-important compliance procedures was MTS Group of Companies the implementation program includes reviewed and improved, regulatory documents were refined, in- companies newly entered into MTS Group. cluding, proposals for modification of the procedure for contract

140 5.4. Compliance and Business Ethics Compliance Awards in 2015

Director of the Compliance Department of MTS PJSC won the ICA best compliance practices won public recognition of the Interna- Compliance Award 2015 “For Promotion of Compliance Practice”. tional Compliance Association experts in Russia. MTS’ achievements in the development and promotion of the

Compliance development plans for 2016

• Implementation of the best compliance practices, study of • Assure compliance with ISO 19600 Compliance Manage- success stories of large international companies, feasibility ment Systems: development of a uniform compliance policy analysis of their implementation within MTS Group; that establishes a consistent compliance risk management approach, coordination of development and implementation • Corporate culture improvement and raising the degree of of all compliance programs based on a uniform compliance consciousness that would serve as a universal internal control system development principle; for each employee in making business decisions (a long-term objective); • Full or partial automation of a number of compliance processes; counterparty inspection optimization. • Implementation of projects for development and distribution of the best practices:

— Participation in the international Project Committee ISO PC/278 for the development of the international ISO 37001 Anti-Bribery Management Systems standard;

— Participation in the National Technical Standardization Committee TK 123 for the development of GOST Anti-Cor- ruption Corporate Management;

— Participation in the OECD and MICEX’s initiative for the establishment and operation of a corporate management and business ethics development club of companies;

2015 Sustainable Development Report 141 Anti-Corruption

In 2015, Russia improved its position in terms of corruption and, with the score of 29, ranked 119th of 168 countries included in the index, according to a survey by Transparency International1. Corruption was at a comparable level in Sierra Leone, Guyana and Azerbaijan. “If Russia’s current position is compared with the result of the previous years, the country’s total score improved by only two points, and its significant improvement in the index is due to the dynamics in a number of other countries,” the survey says.

G4-DMA Consolidated efforts of the authorities, business and population are needed to reduce corruption in the country. We are convinced that one should always start with oneself, and for this reason MTS is doing its best to mitigate corruption risks, leveraging the most advanced anti-corruption measures based on the anti-corruption laws of the countries in which the Company operates. Fundamental documents regulating the anti-corruption requirements within MTS are the Code of Business Conduct and Ethics and the Compliance with Anti-Corruption Legislation Policy. In addition, anti-corruption law enforcement procedures are set forth in the Company’s business process regulations.

MTS has the anti-corruption compliance function in place to implement the compliance system that establishes the standards of personal responsibility for decision-making, including review of actions for their corruption nature, as well as initiators themselves and their line managers.

G4-15 Anti-corruption practice development results in 2015

New versions of the internal anti-corruption regulations were • Regulations of the Internal Investigation process define the prepared, approved and put into effect: procedure for the identification of events, circumstances, persons guilty of violating the requirements of the labor and • The Anti-Fraud Policy2 specifies the underlying anti-fraud civil laws and the Company’s regulations; signs of violations principles and defines a regulatory and organizational frame- of the applicable criminal and administrative laws of the work for fraud prevention, detection, minimization and (or) Russian Federation, anti-corruption legislation, legislation response at MTS PJSC; on counteracting the abuse of insider information (to the extent applicable to the activities of MTS PJSC Group and/or • Regulations of the Counterparty Information Review process its employees) and antimonopoly legislation; determination define a framework for the preparation and implementation of the causes and conditions which have contributed to the of the counterparty information review procedure; violation or pecuniary damage to the Company.

1 gtmarket.ru/news/2016/01/27/7287 2 Communications fraud means intentional, including fraudulent, actions committed by third parties through the use of communications in order to illegally receive the services and use the resources of the client and/or the communications service provider without intention to pay, to obtain unauthorized access to the client’s and/or service provider’s confidential information, including for the purpose of financial gains, as well as other actions focused on causing damage or other harm to the client and/or the service provider. Such actions include, but are not limited to SIM card cloning, hardware cracking and international PRS traffic generation, unauthorized access to subscribers’ personal areas for the purpose of defrauding subscribers out of money, unauthorized international traffic termination.

142 5.4. Compliance and Business Ethics On March 19, 2015, MTS joined the Anti-Corruption Charter of the Russian Business and entered the Consoli- dated Register of the Charter Members.

The Anti-Corruption Charter of the Russian Business was signed by the leadership of RSPP, Russia’s Chamber of Commerce and Industry, PO Business Russia and OPORA ROSSII on September 20, 2012 at the 11th Invest- ment Forum in Sochi with the participation of Russian Prime Minister Dmitri Medvedev.

The essence of this document is that businesses should implement dedicated anti-corruption programs and practices that affect not only the situation within companies, but their relationships with business partners and the government as well.

The implementation of the Compliance with Anti-Corruption In the area of procurement and asset management: Legislation Policy included the following activities: • Support and control of competitive procedures, contracting Organizational and legal activities: and procurement;

• Improvement of the procedure for the prevention of corrup- • Audits of financial and business operations, performance of tion risks typical of the Company’s activities; contracts and investment projects;

• Audits of the Company’s business areas related with the • Due diligence on contractors during procurement procedures highest corruption risk; in order to identify signs of a conflict of interests and minimize purchases from the sole supplier; • Interaction with the Compliance and Control department on a regular basis; • Review of the use of assets, including real property, for the statutory purposes. • Interaction with the law-enforcement and regulatory bodies in anti-corruption matters on a regular basis; In the area of operations on financial markets:

In the area of HR policy: • Regular monitoring of compliance with authorization requirements to access insider and sensitive information. • Additional employee checks were conducted when appointments to higher-ranking senior positions were considered;

• Polygraph testing was made for the employees engaged in procurement as well as during filling of positions most exposed to a corruption risk;

No corruption in charitable projects

MTS implements charitable programs in accordance with the submit a detailed report on spending MTS funds for the intended MTS Charitable Activities Policy and Regulations of the Chari- purpose. table Project Organization and Implementation process. These documents define a framework for planning and implementation For the purpose of corruption risk prevention during the imple- of charitable activities, including compliance procedures, and a mentation of charitable projects, all such projects are subject to plan of actions necessary to organize and carry out charitable approval in the Oracle E-Business Suite system that ensures that projects at the federal and regional levels. The same documents all required persons are covered by the approval chain. If govern- contain the exhaustive list of charitable assistance circumstances ment officials are involved in the implementation of charitable and requirements to the documents necessary to keep detailed projects, such projects are subject to additional approval by the records of charity-related expenses, including the requirement to Compliance Department. The Compliance Department exercises

2015 Sustainable Development Report 143 G4-SO5 post-control of compliance with the procedure and requirements No instances of corruption were revealed at for the implementation of charitable projects within quarterly MTS in the reporting period. There are no legal monitoring. Should any violation be revealed, the Compliance actions related to corruption practices against Department notifies the performer’s chief thereof and makes recommendations on disciplinary actions in order to prevent MTS or MTS employees. violations in the future.

G4-SO4 Informing on Anti-Corruption Policies and Methods

Prior to entering into contractual relationships, all the Compa- to be admitted to the Company’s procurement procedures prior ny’s potential contractors shall be subject to mandatory check, to entering into an agreement, this legal entity shall fill out a including for signs of compliance risks, and shall also familiarize Questionnaire Form showing the aspects and degree of this legal themselves with the MTS Code of Business Conduct and Compli- entity’s observance of the applicable anti-corruption legislation. ance with Anti-Corruption Legislation Policy. For any legal entity

Anti-Corruption Clause in Agreements

Depending on the type of the contractor and the agreement the system determines automatically whether such clause needs made, we propose to sign a supplementary agreement known to be inserted in the agreement or not. That said, our contractors as the anti-corruption clause which specifies the contractor’s have the right to make changes in the anti-corruption clause or obligation not to participate in corruption schemes. The rules propose their version thereof which is subject to approval by the of inclusion of the anti-corruption clause are set forth in the Compliance Department. Contracting Regulations, define the criteria for determining it necessary to insert the anti-corruption clause in agreements To minimize the risk of the Company’s involvement in corrupt based on the type of the contractor and the type of expense, practices, MTS has developed due diligence procedures in and describe the types of expenses. Control of inclusion of the respect of contractors, both legal entities and individuals. These anti-corruption clause is via the electronic contract approval sys- procedures also apply to the extent the Company buys ownership tem Oracle E-Business Suite at the stage when the agreement is stakes in any legal entity. created by the performer. Based on the specified type of expense,

Anti-corruption policy development plans

Efforts towards further development of the anti-corruption pol- transparent, and to develop anti-corruption monitoring mech- icy as part of the compliance system improvement will be contin- anisms to add value to the steps taken to prevent corruption at ued in 2016. We will continue to further improve the standards MTS. and regulations in order to make the business processes more

144 5.4. Compliance and Business Ethics 5.5. Transparent Procurement Procedures

Procurement management is intended to maximize the Company’s G4-DMA business expansion, achieve the full satisfaction of the client’s needs and offer the best value for money.

MTS builds its relationships with suppliers based on the princi- received are handled by the employees of the Strategic Devel- ples of good faith, integrity and transparency. To that end, we opment and Procurement Planning Department. enhance our sound business relations both within the Company and with our contractors. In 2015, the line received 460 messages from the current and potential suppliers (average 9 messages a week). All the mes- Procurement at the Company is in accordance with the special sages were handled, our partners received comprehensive policy developed as required by regulatory authorities and is answers on the message subject. focused on the efficient use of monetary resources and improvement of competition and transparency. Equal access to procure- • [email protected] is the line of the Internal Control and ment procedures is achieved through offering equal competitive Audit Unit, part of the Single Hotline, used for sending mes- opportunities and common rules for all those engaged in a sages about violations in procurement activities. Messages procurement procedure prior to the initiation thereof. The MTS about violations in procurement activities received by this Procurement Rules and Code of the Supplier’s Business Conduct line are handled by the employees of the Control Depart- are available to any supplier on our website in the Procurement ment. section tenders.mts.ru. • [email protected] is the e-mail address for suppliers’ ques- The Company approved the Code of MTS PJSC Supplier’s Business tions and navigation in the Procurement Procedure Newslet- Conduct (www.dealers.mts.ru/partn/purchases/kodeks) describ- ter Opt-In System on the Procurement portal. ing the minimum standards expected to be observed by suppliers. Apart from good faith and integrity, the Code highlights This e-mail address receives average about 30 messages a the significance of compliance by suppliers with environment week from the current and potential suppliers. Our partners protection laws. are given advice on all questions and receive help in working with the Newsletter Opi-In System. Any tender is prepared in detail by a category purchasing manager. A statement of work and evaluation criteria are specified in working with the client, and it is checked to ensure that no terms tailored to a specific tenderer are offered. For the purpose of improvement of customers’ procurement competence, MTS developed a ded- E-mail addresses of the lines for supplier feedback are available icated “Procurement Guide” in the form of an on MTS website to obtain information about the terms of participation in procurement procedures and prevention of procure- interactive training course with game elements. ment violations: The course introduces to the procurement process, provides easy navigation in the full range • [email protected] is the line of the Procurement Management Unit, of issues and facilitates guidance in regulatory part of the Single Hotline, used for sending messages about documents in an exciting game form. the delivery of products made and services rendered as well as about participation in procurement procedures. Messages

2015 Sustainable Development Report 145 Procurement portal is the system for posting and sending notifi- cations of procurement procedures and is used for registration of suppliers and posting of information about the commencement/ prolongation/closure of open and closed procurement proce- According to the National dures. Procurement Transparency Rating 2015, MTS PJSC was awarded IT system improvements are currently in the works in order to a High Transparency level. engage additional suppliers – small and medium-size business (SMB) entities. Bidding in certain categories will be held only among SMB entities, enabling to enlarge the range of engaged suppliers from among SMB entities.

In 2015, MTS completed the deployment of OracleSourcing, the IT system module enabling the Company to hold 100% of Management Unit of the MTS Corporate Center participates in procurement procedures electronically. OracleSourcing is the the procurement process in Armenia and Belarus with procure- integrated ERP solution that enables complete automation of the ment estimated at over USD 250 thousand, in Turkmenistan with sourcing process, including holding of electronic auctions on the USD 10 thousand, and in Uzbekistan with USD 200 thousand. The own electronic trading platform. Company relies on the Purchase Price Determination Principle according to which the purchase price shall not be higher than Total purchases made in 2015 electronically amounted to over prices for Russia, logistics cost included. In 2015 in total, the RUB 99 billion. Average efficiency of holding procurement pro- Procurement Management Unit of the MTS Corporate Center cedures was 11% at the level of MTS Russia, 6.7% at the level of participated in more than 120 procurement procedures of MTS MTS Ukraine, and 9.2% at the level of MGTS. subsidiaries and affiliates.

Procurement activities of MTS’ foreign subsidiaries in 2015 were We always aim to buy services and products of local suppliers, integrated into the MTS single procurement process. MTS PJSC thereby promoting economic development in the regions and representatives are members of local tender committees, except countries in which MTS operates. for Uzbekistan where MTS PJSC representatives are members of the Supervisory Board due to the specifics of the local legislation. An annual supplier survey known as Voice of the Supplier covering 47 representatives of MTS suppliers was held in 2015. This In 2015, the Procurement Management Unit of the MTS Corpo- process is part of the MTS PJSC Supplier Management System and rate Center participated in local procurement by subsidiaries and a way of developing relationships with suppliers. affiliates in order to achieve additional saving through the implementation of the Corporate Center approaches in host countries, The NPS (Net Promoter Score) methodology, the one similar to transmission of price conditions, unification of requirements to the Annual Supplier Evaluation 2015 methodology, was used for equipment/services purchased and consolidation of the scope of the Voice of the Supplier survey in 2015. Based on the answers needs at the level of the parent company MTS. The Procurement given by each supplier, NPS was calculated to show how much

G4-13 Share of Local Suppliers, % G4-12

G4-EC9 85 76 81 100 100 92 100 100 100 92 85 84

2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015

MTS Russia MGTS RTK MTS Ukraine

146 5.5. Transparent Procurement Procedures Joint Procurement

For the purpose of the strategic partnership agree- processes and strengthening positions on the host ment between MTS and Vodafone, the companies markets. participate in the global programs of joint network and customer premises equipment purchases, there- MTS also carries out joint procurement with JSFC Siste- by enhancing the operating efficiency of business ma, adding significant value to procurement activities.

the percentage of those who would recommend the brand, its This model was developed using the NPS mutual cross-evaluation products and services is higher than the percentage of those who method by comparing two NPS indices: would criticize those. • NPS measured based on the findings of the Voice of the Sup- Based on the results of the survey in 2015, total NPS Grade A (Ex- plier survey – the evaluation of MTS PJSC by suppliers. cellent) for MTS PJSC increased (NPS 2015: 85.53) compared with 2014, if recalculated as appropriate (NPS 2014: 79.90). • NPS measured based on the findings of the Annual Supplier Evaluation – the evaluation of suppliers by MTS PJSC. Despite the high total NPS for MTS PJSC, the survey revealed a number of areas for the development of MTS as the client as This model provides insight into the Supplier Client mutual reflected in the plan of actions focused on optimization and cross-evaluation and helps identify critical deterrents to effective improvement of MTS operations. and mutually beneficial cooperation between supplier companies and MTS PJSC. The Supplier Client relationship satisfaction model was developed based on the findings of the Voice of the Supplier survey and due The 2015 relationship satisfaction model demonstrated a high to the shift to the NPS methodology in 2015. level of satisfaction from both parties.

Actions to increase transparency of procurement procedures and mitigate corruption risks associated with procurement activities in 2015

A compulsory course of online training in “The Code of Business • requirements to observe by Suppliers of the principle of no Conduct and Ethics of Public Joint-Stock Company Mobile TeleSys- conflict of interests; tems” was updated; • wishes to suppliers in respect of notifying MTS of grave vio- Compulsory in-person training in compliance for the Company’s lations as regards compliance with the standards specified in management, including a review of business units’ functional the Code of the MTS PJSC Supplier Business Conduct. risks;

The Code of the MTS PJSC Supplier Business Conduct was modi- fied to include the following:

• requirements to observe the Code standards by any supplier, including management, employees, contractors, subcontractors and agents;

2015 Sustainable Development Report 147 The 2015 Major Results

Enhanced efficiency of minor procurement management: meas- Acceleration of procurement procedures: a pilot project for the ures were implemented to reduce small purchases through the simultaneous approval of the agreement and open FX position use of catalogues, conditional outsourcing, etc. was implemented. The result unveiled opportunities for reducing the approval period by up to 20%. Active integration of procurement activities with MTS Group’s foreign subsidiaries and cooperation with JSFC Sistema compa- Further development of the Inventory Management project: nies. 2015 saw the expansion of partnership with MTS-Bank in inventories were reduced by 60.5% during 12 months of 2015. Marketing, IT and Services & Facilities, while a TV transaction made jointly with Ozon, Detsky Mir and Concept Group provided A course “Interactive Procurement Guide” with the description of two-digit saving to all the parties to the transaction. all main procurement processes was prepared and posted to the MTS internal portal to increase the quality of communications Further implementation of measures to reduce exchange risks by with the client. using exchange clauses, receiving additional discounts, advances and deferral of payments.

G4-DMA Competition

G4-SO7 We are sure that bona fide and fair competition is instrumental in In 2015, MTS Group companies were involved in over 30 anti-mo- sustainable development and growth of the economy, therefore nopoly proceedings relating to the application of Federal Law MTS always opposes any form of obstruction of competition and “On Protection of Competition”. The cases at law were violations aims to fully comply with the anti-monopoly legislation of the committed (by both MTS Group companies and third parties) countries in which MTS operates. on various markets (mobile wireless communications, granting access to the infrastructure, etc.).

Among others, MTS PJSC participated in the anti-mo- of the anti-monopoly legislation relating to unfair nopoly proceedings initiated by FAS Russia against T2 competition, FAS Russia Commission resolved that Mobile Ltd. in the case of the breach of the anti-mo- the defendant’s actions as the sponsor of the promo nopoly legislation consisting in the distribution of action “The Season Open” focused on sparking sub- information prejudicial to the business reputation of scribers’ interest in the services rendered under the MTS PJSC during the promo action called The Season Tele2 trademark were intended to gain advantages in Open held at the special website http://zahvost.ru. business by discrediting competitors and developing a negative client experience with the services of mobile As a result of these proceedings, the actions of T2 Mo- communications operators already operating on the bile Ltd. were recognized as an act of unfair competi- market of such services. In such case, the image of tion contradicting Paragraph 1 of Part 1 of Article 14 Tele2 as an “honest” operator is persistently formed in of Federal Law “On Protection of Competition”. Upon clients in contrast to other “dishonest” players in the examination of the whole of the evidence available market of mobile wireless communications, though in the case files and with due regard to the opinion this view is totally biased and is not supported by any of the FAS Russia’s Expert Council on the application specific facts.

148 5.5. Transparent Procurement Procedures 5.6. Information Disclosure

MTS always aims to conform to the international legal standards. It means above all that all internal processes and relationships both with counterparties and within the Company are well-regulated and transparent. One of the most important goals of MTS is to maintain strong trustful relationships with shareholders and investors, based on the principles of direct dialog in accordance with the effective legislation and prevalent international practices.

The information disclosure system developed with due regard to national conferences, hold road shows and meetings with in the requirements of the Moscow Exchange and New York Stock investors, organize days of analysts. Exchange listing rules is effective and provides for the observance of the transparency principle. Publication of financial results according to quarterly statements is carried out with phone conferences involving MTS managers. MTS PJSC tries its best to consider interests of investors and Published financial statements are supported by presentation ma shareholders and to establish trustful relationships of MTS with terials for better coverage of achieved results and presentation of partners through the improvement of transparency and openness the Company’s strategy. of Company’s activities. MTS strives to continuously improve interaction with investors In accordance with the public availability principle the Company and shareholders, using the experience of other companies and publishes information on significant events at the website of US monitoring the latest legislation changes and advanced stand Securities and Exchange Commission1, of the Russian Information ards in this area. Agency (newsfeed)2, and at the official website of MTS: for share- holders3 and investors4, as well as in iOS application5. In case of question related to MTS activities the investors may contact the services on interaction with shareholders and rela We also publish at our official website some other information. tions with investors. Information on responsible representatives Sections “For investors and shareholders”6 and “Corporate Gov- of relevant business units and their contacts is available in the ernance”7 include internal corporate documents, annual reports, Annual Report for 2015, Section “Interaction with Shareholders reports on sustainable development, materials for shareholder and Investors”. meetings, information on the registrator and auditor, information on dividend policies, quarterly financial statements under IFRS The information resource known as Single Hotline is in place to and RAS, information on quoted prices of shares and bonds. promptly respond to feedback from clients and counterparties Annual Report of MTS PJSC is also published in iTunes8. and increase employees’ loyalty to the Company. Feedback topics cover a wide range of issues relating to the activities of MTS and Maintenance and development of the effective dialog with equity its subsidiaries, enabling employees and counterparties to have market participants require a constant involvement of Company’s exhaustive information on the topics of their interest. managers. MTS representatives regularly participate in inter

1 www.sec.gov 2 www.disclosure.ru 3 www.company.mts.ru/comp/ir/control/data 4 www.mtsgsm.com 5 itunes.apple.com/gb/app/mts-investor-relations/id928385820?mt 6 www.company.mts.ru/comp/ir 7 www.company.mts.ru/comp/ir/control 8 itunes.apple.com/ru/app/godovaa-otcetnost-gruppy-mts/id919440557?mt=8

2015 Sustainable Development Report 149 Additional Information

Recognition of Achievements...... 152 About this Report...... 155 GRI Content Index...... 161 Glossary...... 167 Contacts...... 170 Feedback Questionnaire...... 171

Recognition of Achievements

Ranking/Contest/Award Achievement Arranged by

Corporate Awards

International awards in PR, Generation M joined the top-5 finalists and became the winner The Holmes Report, the world’s branding and reputation man- in the In2 SABRE category "Gamification/User-Generated leading source of PR analytics agement 2015 SABRE Awards Contests"

2015 Runet Awards Generation M became the winner in the category "Culture, Russian Association for Elec- Mass Media& Mass Communications" tronic Communications and Coordination Center for TLD. RU/.РФ.

Corporate Charity Leaders 2015 MTS is the winner in the category "For Information Openness", Donors Forum, PwC, the Generation M became the winner in a special category "The international auditing and con- Best Program Unveiling Corporate Charity Policy and Principles sulting group, and Vedomosti of Corporate Social Investment" newspaper

Supplier of the Year 2015 MTS won the Supplier of Telecommunications and Communi- Interregional Non-Profit Organ- cations Services award ization "Moscow Association of Entrepreneurs" and the Russian Chamber of Commerce and Industry

Khrustalnaya Garnitura MTS won the Best Collection Team and Seller of the Year Call Center Guru Professional awards. Community

Russian national competition MTS’ corporate magazine "Zaprosto" became the winner in The Russian Association of "Best Corporate Media" the category "In-house Magazines", radio station Prosto Radio Communication Directors and won the Radio award Corporate Publishing

Effie Awards MTS received bronze awards in the category "Telecom, Internet EffieWorldwide, RosBusiness- & Other Communications Services" for its campaign "#DelayIn- Consulting CJSC ternet with unlimited plan SmartNonstop from MTS" prepared byBBDO, MOSAIC, and in the categories "Media Idea" and "Engaged Community" for its MTS in Dance campaign.

152 Recognition of Achievements Ranking/Contest/Award Achievement Arranged by

Time of Innovations 2015 Telecom Idea won in the category "The Best Innovation Promo- tion and Development Project"

Competitive Procurement MTS became the winner in the category "The Best Supplier B2B-Center, an electronic trad- Leader Relationship Management System" ing platform

Annual competition "For active MTS won the 2015 awards News agencies Interfax and corporate information disclo- AK&M sure policy"

The VII Russian national compe- The project Children Teaching Adults won in the category "The The Ministry of Communi- tition "The Top-10 Public Sector Best Media Project in Education" cations and Mass Media of IT Projects. Educational & Health Russia and COMNEWS Group of Care Institutions" Companies

The Moscow Times Awards 2015 MTS cross-media project #WowMoscow became a finalist The Moscow Times in the category "For Contribution to Live Improvement", the Good Deed charity event arranged by MGTS became the winner in the category "Corporate Social Responsibility Project of the Year"

Kotler Awards MTS is the winner in a special category "For giving the tech- Philip Kotler nology brand a new social and humanitarian twist" for MTS rebranding You know that you can.

Comnews Awards MTS became the winner in the category "Leader by Annual COMNEWS Group of Compa- Revenue from Communications & Broadcast Services". nies

The 2nd Russian national AKMR The PR Department of MTS joined the top-5 PR and corporate The Russian Association of ranking "TOP-COMM-2015" affairs departments Communication Directors and Corporate Publishing

HR Awards and MTS Team Achievements

Annual HR project contest "HR MTS won the Start of Career award. HeadHunter Group of Compa- Brand Awards" nies (hh.ru)

MTS won the nomination “Big heart” with the project Genera- HeadHunter Group of Compa- tion M and became the most socially-oriented employer nies (hh.ru), YUM! Company (KFC, PizzaHut brands)

MTS was acknowledged with special award “For contributing HeadHunter Group of Compa- to the development of HR-branding”, which is bestowed once nies (hh.ru) in 10 years

2015 Sustainable Development Report 153 Ranking/Contest/Award Achievement Arranged by

Best Employers Study 2015 MTS received international Aon Best Employers Study certifi- International HR consulting cation. company AON Hewitt and its Russian partner AXES Manage- ment

People Investor Integration contest RegiON won the 2015 awards. The Russian Managers Associ- ation

MTS Executives Awards

Media Manager 2015 Elena Kokhanovskaya became the winner in the category "For The Russian Association of Contribution to Sector Development". Communication Directors and Corporate Publishing

Director of the Year Ron Sommer became the winner in the category "The Best The Association of Independent Chairman of the Board of Directors". Directors

Annual National Awards "Suc- Ruslan Ibragimov was the Achievement of the Year prize The Russian Corporate Counsel cess. Corporate Counsel of the winner. Association Year"

TOP 1000 A.Ushatsky was the winner in the Best IT Director category, The Russian Managers Associ- V.Latsanich was the winner in the Best Marketing Director ation category

The TOP-1000 Russian Managers The ranking included MTS top-managers: A.Dubovskov, The Russian Managers Associa- ranking M.Arkhipov, R.Ibragimov, V.Savchenko, V.Latsanich, A.Ushatsky, tion and Kommersant Publish- M.Kalinin, E.Kokhanovskaya, V.Shorzhin ing House

154 Recognition of Achievements About this Report

Dear friends, we are proud to present the 8th Sustainable Devel- • identify areas for improvement of the company’s manage- G4-28 opment Report of the Mobile TeleSystems Group for 2015. The ment system G4-29 previous report was published in 2015. MTS publishes its non-financial reports on an annual basis. • raise the degree of employees’ involvement in business pro- G4-30 cesses and engagement of motivated specialists Every year we improve the quality of our reports reporting, since we understand that the process of preparation of sustainable • boost innovations and elaborate optimum solutions development reports covers a number of strategic and operative tasks, namely: • improve reputation, raise partner and client loyalty, deserve respect among local community • understand the total volume of main impacts of our company on economics, environment and society • obtaining competitive advantages.

• identify opportunities for business development and risk minimization

Principles of reporting

The MTS Group compiled its sustainable development report in addition, the social report incorporated the comments and rec- accordance with the GRI G4 Sustainability Reporting Guideline, ommendations of the Council of the Russian Union of Industri- best domestic and international practices, as well as a pilot alists and Entrepreneurs on non-financial reporting, which had version of the Appendix for the telecommunications industry. In been given during approval of 2014 social report.

Material aspects G4-18 The approach to determining of materiality and of performance • Make a survey of stakeholders in order to update the material indicators aspects.

In accordance with international guidelines GRI G4, the core of pre- • Include material aspects in a respective ranking map which paring a sustainability report is a focus on the process of identifying shall be used while compiling the report and arranging its material aspects based on the Materiality Principle1. data (in particular, while providing a detailed information on indicators). The procedure for determining materiality comprises the following: The questionnaire for determining the material aspects of MTS • List all possible material aspects that are related to the specif- sustainable development was sent to internal and external ics of the telecoms industry. stakeholders.

1 Material Aspects are those that reflect the organization’s significant economic, environmental and social impacts; or substantively influence the assessments and decisions of stakeholders.

2015 Sustainable Development Report 155 Materiality matrix

3,00

6 2,50 40 45 47 42 41 43 49 34 46 50 48 1,19 18 16

2,00 15 9 44 14 12 33 8 103,13 7 5 21 20 39 36 25 11 38 1,50 24 30 37 17 22 29 23 2

Influence on stakeholder assessments and decisions assessments on stakeholder Influence 28 4 32 31 27 26 35

1,00 1,00 1,50 2,00 2,50 3,00 Significance of economic, environmental and social impacts

red and green highlight material aspects; black highlights non-material aspects; asterisk (*) indicates aspects specific to the MTS Group.

G4-19 1. Economic performance disclosed in 2014 2. Market presence new 3. Indirect economic impacts disclosed in 2014 4. Procurement practices disclosed in 2014 5. Materials 6. Energy new 7. Water 8. Emissions 9. Effluents and waste 10. Products and services (ecology)

156 Recognition of Achievements 11. Compliance (environmental) new 12. Transport 13. Overall (environmental) new 14. Supplier environmental assessment 15. Environmental grievance mechanisms 16. Employment disclosed in 2014 17. Labor/management relations disclosed in 2014 18. Occupational health and safety disclosed in 2014 19. Training and education new 20. Diversity and equal opportunity disclosed in 2014 21. Equal remuneration for women and men disclosed in 2014 22. Supplier assessment for labor practices disclosed in 2014 23. Labor practices grievance mechanisms new 24. Investment 25. Non-discrimination disclosed in 2014 26. Freedom of association and collective bargaining 27. Child labor disclosed in 2014 28. Forced and compulsory labor 29. Security practices new 30. Indigenous rights assessment 31. Supplier human rights assessment disclosed in 2014 32. Human rights grievance mechanisms new 33. Local communities 34. Anti-corruption disclosed in 2014 35. Public policy disclosed in 2014 36. Anti-competitive behavior disclosed in 2014 37. Compliance (society) new 38. Supplier assessment for impacts on society disclosed in 2014 39. Grievance mechanisms for impacts on society disclosed in 2014 40. Customer health and safety new 41. Product and service labeling new 42. Marketing communications new 43. Customer privacy new 44. Compliance (product responsibility) new 45. Responsible business conduct* disclosed in 2014 46. Accessibility of telecommunications products and services* disclosed in 2014 47. Development of safer internet* disclosed in 2014 48. Improving access to services* disclosed in 2014 49. Development of innovative services* disclosed in 2014 50. Development of telecommunications infrastructure* disclosed in 2014

2015 Sustainable Development Report 157 Preliminary results of the survey: economic, environmental and social impact” and 2.0 on the axis of “Impact on assessments and decisions of stakeholders”. Thirty two completed questionnaires were received. Of these, 15 questionnaires were received from external stakeholders, and Besides the description of material aspects, the 2015 Report 17 – from internal ones. includes a description of focus areas of corporate social responsibility, the company’s contribution to the development of the host A map of material aspects was prepared based on the results of regions and the telecommunications industry, corporate mech- processing the questionnaires. The proposed aspect materiality anisms that ensure high quality and reliability of our operation, boundary is assumed to be 1.9 on the axis of “Materiality of description of key charitable and social projects of the company, analysis of relationships with key stakeholders in CSR context.

Compliance of our 2015 Sustainable Development Report with GRI G4 Guideline

The MTS Group compiled its 2015 Sustainable Development The key difference of the 2015 version from the 2014 one is that Report in accordance with the GRI G4 Sustainability Reporting the newer version is based on an updated list of material aspects Guideline (the “Core” option). of the Group’s operations that has allowed to identify the most critical activities and to focus on the disclosure of information, which is of the greatest interest to stakeholders.

The Team

The report was prepared by a team that included representatives defined the format of presenting information on selected topics of nearly all business units of the Company (financial, legal, HR, and appointed employees to collect and analyze information PR, IR, GR, marketing, technology, strategy, corporate govern- on relevant report sections. The process of preparing the social ance, monitoring and audit). The work team defined the range of report was coordinated by the Department for professional issues to be addressed in the report, in addition to those which communities relations which is a part of our Corporate Commu- were identified during the MTS top management survey. It also nications Unit.

G4-28 Scope of Report

G4-22 The corporate-wide 2015 social report of MTS Group MTS Group changes in reporting periods, nature of business and assessment G4-23 covers the activities of MTS and its affiliates in all host territo- methods. There are no substantial differences as compared to G4-20 ries – 83 regions of Russia as well as Ukraine, Belarus, Armenia, earlier reporting periods with regard to the scope, boundaries, Turkmenistan and Uzbekistan. This report summarizes all social or methods of measurement used in the 2014 social report. No G4-21 aspects of the Company’s activities for the period from January 1 analysis of the impact of material aspects on suppliers and other to December 31 of 2015. groups of legal entities was done owing to lack of information. The boundaries of material aspects apply to the MTS Group. This report contains no restatements of information provided in previous reports, as well as no reasons for such restatements,

158 About this Report Endorsement of Report

This is the fifth approved social report by MTS. As in previous years, the approval of the report took the form of Public endorsement by an independent third party, namely, the Council of the Russian Union of Industrialists and Entrepreneurs (RUIE) on non-financial reporting.

We will do our best to consider all public endorsement based comments in respect of the MTS Group and incorporate them in the next cycles of our non-financial reporting.

Extract from the Minutes of the Council of RUIE on non-financial reporting from 15th of July 2016 on the question of the Agenda “About the Public Endorsement of the Sustainable Development Report of MTS Group for 2015”

Regarding the question of the agenda “About the public duly noted and incorporated into the 2015 Report. For endorsement of the Sustainable Development Report of MTS example, the Report presents the information about Com- Group for 2015” the following decisions were made: pany’s self-evaluation in accordance with the principles of the international standard ISO 26000:2100. The information 1. To declare the public endorsement of the Report as about the procedure of material topics definition according- accomplished. ly the stakeholders expectations is included in the Report, energy consumption information is presented, ecology 1.2. Put on record in the Statement of public endorsement theme in the context of supply chain responsibility is incor- the following: porated in the Report, references on the sources with more complete information about questions briefly mentioned in The Sustainable Development Report of MTS Group for the Report are included. 2015 contains material information, covers vide range of questions on key aspects of responsible business conduct 1.3. To approve the Statement of public endorsement taking in accordance with the principles of the Social Charter into account discussions. of the Russian Business. The Report provides sufficient information about the developing of the modern system 2. To pay Company’s attention on the following: The of telecommunication services, stakeholders engagement Statement is prepared for MTS Company, which can use it for practice, responsible business practice and Company’s intercorporate aims and for aims of communications with social projects. stakeholders by means of its publishing in whole without any changes. The recommendations made by the RUIE Council following the public verification of the MTS Group’s Report 2014 were

Chair of the Council of RUIE on non-financial reporting Fedor Prokopov

Deputy Chair of Council of RUIE on non-financial reporting Elena Feoktistova

2015 Sustainable Development Report 159 G4-27 Comments by stakeholders by the results of extended session of CSR Committee

Comments by stakeholders Action by the Company

MTS and its subsidiaries

1. Make the report more focused, for example by selecting 3 or 4 main topics Consider when preparing the 2015 report. dealing with Company's projects

2. Use eco-friendly paper Rejected due to eco-friendly paper being too costy.

3. Represent the structure as three major modules: Consider while preparing the 2015 report. 1 — “MTS is reliable”, “MTS leads the market”; 2 — “What MTS has given to the community”, i.e. more cost-efficient services and stations; also describe the non-commercial projects, including Genera- tion M; 3 — “Internal efficiency of MTS”, which covers financial indicators, anti-corruption policy description, procurements, other management approaches, BoD structure.

4. Make a separate section “Compliance and business ethics”. Incorporate in the 2015 report.

Representatives of AFK Sistema companies

5. Include real stories of people into the Community section. Consider while preparing the 2015 report.

6. Make better use of infographics in the report. Consider while preparing the 2015 report.

7. Use the image bank of MTS. Consider while preparing the 2015 report.

8. In the brief version of the report, place emphasis on infographics since they are Consider while preparing the 2015 report. less formalized and make the report look like a booklet.

160 About this Report 1 GRI Content Index G4-32

G4-33

General standard disclosures Reference

Strategy and analysis

G4-1 Provide a statement from the most senior decision-maker of the organization 3

Organizational profile

G4-3 Report the name of the organization 1

G4-4 Report the primary brands, products, and services 8, 18–19, 37

G4-5 Report the location of the organization’s headquarters 170

G4-6 Report the number of countries where the organization operates, and names of countries 8, 14–15 where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report

G4-7 Report the nature of ownership and legal form 1

G4-8 Report the markets served (including geographic breakdown, sectors served, and types of 14–15 customers and beneficiaries)

G4-9 Report the scale of the organization 97

G4-10 Report the total number of employees by employment contract and gender 99

G4-11 Report the percentage of total employees covered by collective bargaining agreements 98

G4-12 Describe the organization’s supply chain 146

G4-13 Report any significant changes during the reporting period regarding the organization’s size, 122, 146 structure, ownership, or its supply chain

G4-14 Report whether and how the precautionary approach or principle is addressed by the report2015.mts.ru organization

G4-15 List externally developed economic, environmental and social charters, principles, or other 142 initiatives to which the organization subscribes or which it endorses

G4-16 List memberships of associations (such as industry associations) and national or international 84 advocacy organizations in which the organization

1 No external assurance of the Report was conducted.

2015 Sustainable Development Report 161 Identified material aspects and boundaries

G4-17 List all entities included in the organization’s consolidated financial statements or equivalent www.company.mts.ru/ documents comp/ir/report/2016-03- 21-5101567

G4-18 Explain the process for defining the report content and the Aspect Boundaries 155

G4-19 List all the material Aspects identified in the process for defining report content 156–157

G4-20 For each material Aspect, report the Aspect Boundary within the organization 158

G4-21 For each material Aspect, report the Aspect Boundary outside the organization 158

G4-22 Report the effect of any restatements of information provided in previous reports, and the 158 reasons for such restatements

G4-23 Report significant changes from previous reporting periods in the Scope and Aspect Boundaries 158

Stakeholder engagement

G4-24 Provide a list of stakeholder groups engaged by the organization 30–33

G4-25 Report the basis for identification and selection of stakeholders with whom to engage 30–33

G4-26 Report the organization’s approach to stakeholder engagement, including frequency of 30–33 engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process

G4-27 Report key topics and concerns that have been raised through stakeholder engagement, and 160 how the organization has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns

Report profile

G4-28 Reporting period (such as fiscal or calendar year) for information provided 155, 158

G4-29 Date of most recent previous report (if any) 155

G4-30 Reporting cycle (such as annual, biennial) 155

G4-31 Provide the contact point for questions regarding the report or its contents 170

G4-32 Report the GRI Content Index for the chosen option 161

G4-33 Report the organization’s policy and current practice with regard to seeking external assurance 161 for the report

Governance

G4-34 Report the governance structure of the organization, including committees of the highest 128–129 governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts

Ethics and integrity

G4-56 Describe the organization’s values, principles, standards and norms of behavior such as codes of 27–138 conduct and codes of ethics

162 GRI Content Index SPECIFIC STANDARD DISCLOSURES

Material Aspects DMA and Indicators Omissions Reference

Economic Disclosures on Management Approach report2015.mts.ru Performance G4-EC4 Financial assistance received from government In 2015 MTS PJSC did not receive financial assistance from government

Market Presence Disclosures on Management Approach 102

G4-EC6 Proportion of senior management hired from the local 102 community at significant

Indirect Economic locations of operation 36 Impacts Disclosures on Management Approach 38, 70

G4-EC8 Significant indirect economic impacts, including the extent of 36 impacts

Procurement Disclosures on Management Approach 145 Practices G4-EC9 Proportion of spending on local suppliers at significant 146 locations of operation

Energy Disclosures on Management Approach 91

G4-EN3 Energy consumption within the organization 92

Compliance Disclosures on Management Approach 86

G4-EN29 Monetary value of significant fines and total number of non- 86 monetary sanctions for non-compliance with environmental laws and regulations

Overall Disclosures on Management Approach 86

G4-EN31 Total environmental protection expenditures and investments 86 by type

Employment Disclosures on Management Approach 97

G4-LA1 Total number and rates of new employee hires and employee 103 turnover by age group, gender and region

G4-LA2 Benefits provided to full-time employees that are not provided 105 to temporary or part-time employees, by significant locations of operation

2015 Sustainable Development Report 163 Labor/Manage- Disclosures on Management Approach 97 ment Relations G4-LA4 Minimum notice periods regarding operational changes, 98 including whether these are specified in collective agreements

Occupational Disclosures on Management Approach 116 Health and Safety G4-LA5 Percentage of total workforce represented in formal joint 117 management–worker health and safety committees that help monitor and advise on occupational health and safety programs

G4-LA6 Type of injury and rates of injury, occupational diseases, lost 117 days, and absenteeism, and total number of work-related fatalities, by region and by gender

G4-LA7 Workers with high incidence or high risk of diseases related to 118 their occupation

Training and Disclosures on Management Approach 107 Education G4-LA9 Average hours of training per year per employee by gender, The records 107, 110 and by employee category are being kept only from 2015 without breakdown by gender and employee category

G4-LA11 Percentage of employees receiving regular performance and 105 career development reviews, by gender and by employee category

Diversity and Disclosures on Management Approach 100 Equal Opportunity G4-LA12 Composition of governance bodies and breakdown of 100 employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

Labor Practices Disclosures on Management Approach 98 Grievance Mechanisms G4-LA16 Number of grievances about labor practices filed, addressed, 98 and resolved through formal grievance mechanisms

Non- Disclosures on Management Approach 102 discrimination G4-HR3 Total number of incidents of discrimination and corrective No incidents of actions taken discrimination

164 GRI Content Index Security Practices Disclosures on Management Approach 102

G4-HR7 Percentage of security personnel trained in the organization’s Training on human human rights policies or procedures that are relevant to operations rights policies or procedures for security personnel was not conducted

Human Rights Disclosures on Management Approach 102 Grievance Mechanisms G4-HR12 Number of grievances about human rights impacts filed, No documented addressed, and resolved through formal grievance mechanisms grievances

Anti-corruption Disclosures on Management Approach 142

G4-SO4 Communication and training on anti-corruption policies and 144 procedures

G4-SO5 Confirmed incidents of corruption and actions taken 144

Anti-competitive Disclosures on Management Approach 148 Behavior G4-SO7 Total number of legal actions for anti-competitive behavior, 148 anti-trust, and monopoly practices and their outcomes

Compliance Disclosures on Management Approach 23

G4-SO8 Monetary value of significant fines and total number of non- No fines monetary sanctions for non-compliance with laws and regulations

Customer Health Disclosures on Management Approach 93 and Safety G4-PR2 Total number of incidents of non-compliance with regulations No incidents of and voluntary codes concerning the health and safety impacts of non-compliance products and services during their life cycle, by type of outcomes

Product and Disclosures on Management Approach 50 Service Labeling G4-PR4 Total number of incidents of non-compliance with regulations No incidents of and voluntary codes concerning product and service information and non-compliance labeling, by type of outcomes

G4-PR5 Results of surveys measuring customer satisfaction 52

Marketing Disclosures on Management Approach 23 Communications G4-PR7 Total number of incidents of non-compliance with regulations No incidents of and voluntary codes concerning marketing communications, including non-compliance advertising, promotion, and sponsorship, by type of outcomes

2015 Sustainable Development Report 165 Customer Privacy Disclosures on Management Approach 58

G4-PR8 Total number of substantiated complaints regarding breaches 59 of customer privacy and losses of customer data

Compliance Disclosures on Management Approach 93

G4-PR9 Monetary value of significant fines for non-compliance with No fines laws and regulations concerning the provision and use of products and services

Providing access Disclosures on Management Approach 70

GRI-PA2 Policies and practices to overcome barriers for access and 70 use of telecommunication products and services including: language, culture, illiteracy, and lack of education, income, disabilities, and age. Include an explanation of business models applied

GRI-PA4 Quantify the level of availability of telecommunications 14–15 products and services in areas where the organization operates

GRI-PA6 Programmes to provide and maintain telecommunication 46 products and services in emergency situations and for disaster relief

Technology Disclosures on Management Approach 43 Applications

GRI-TA2 Provide examples of telecommunication products, services and 43, 55 applications that have the potential to replace physical objects

166 GRI Content Index Glossary

3G, 3rd generation is a set of services that encompasses Charity means voluntary transfer to people or legal entities on high-speed mobile access to Internet and wireless voice com- non-commercial basis (free of charge or on favorable terms) of munication services. 3G uses packet data transfer technique. assets, including cash, performance of work, provision of services 3G networks UHF frequencies, typically in the range of about 2 and other support free of charge. GHz, transmitting data at up to 3.6 Mbit/s offering conferencing, watching of movies and TV on the mobile phone, etc. Stakeholder engagement means company’s activities to understand the expectations and concerns of stakeholders and to 4G (LTE) is the 4th generation of mobile telecommunications involve them in the decision-making process. technology featuring high data rates and improved voice communication quality. As 4G are commonly referred to cutting-edge technologies that enable data speeds of up to 10 Mbit/s for Fiber-optic communication line (FOCL) means a type of data mobile subscribers. transfer system based on using optical dielectric waveguides, known as “optical fiber”.

ARPU: Average revenue per user Global Reporting Initiative (GRI) means a non-governmental organization that cooperates with all stakeholders. The GRI was DATA company is a company focused on providing data transmis- established in the US in 1997 by CERES (Coalition for Environmen- sion services. tally Responsible Economies) and the Governing Council of the United Nations Environment Program (UNEP). GRI coordinates the work program of regional offices in Australia, Brazil, China, GPON (GigabitPON) means Passive Optical Network that pro- India and the United States. The entire network of stakeholders viding multifunctional high-quality reliable broadband Internet includes 30,000 people. access at unprecedented high speeds of up to 1 Gbit/s. The subscriber uses a single fiber optic line fed directly in his/her apartment to receive telephony, Ethernet data, or video services Stakeholders means natural and legal persons or groups that with guaranteed quality. have an impact on the company’s activities or are affected by them and have the right, in accordance with the law and international conventions, to directly initiate legal proceedings against MOU (Minutes of Usage) means a metric measure equal to the the company. Stakeholders include company’s shareholders, number of voice traffic minutes used by a network subscriber. investors, employees, suppliers, contractors, consumers, trade unions, mass media, people who live on the territory where the company operates, etc. ADR means American Depositary Receipts.

Inclusive environment - means an integrated approach that pro- Safe working conditions means elimination of the impact of motes social integration of persons with disabilities and is based harmful and hazardous working conditions or keeping them on the principles of social and cultural rehabilitation. within the hygienic standards.

Intellectual volunteering means a kind of volunteering that Business process means a sequence of actions, involving several includes arranging and conducting intellectual activities. sub-divisions of the company, and which results in the creation of a final product that has value for the consumer/client.

2015 Sustainable Development Report 167 Internet means a global system of integrated computer networks Mission means the purpose of an organization, the meaning of its that uses IP protocol and the packet routing technology. Internet existence, that makes it different from other similar organizations. forms a global information space and is the physical basis for the World Wide Web (WWW), and many other data transfer systems (protocols). MICEX means Moscow Interbank Currency Exchange (Russia).

Quality of life means the entirety of socio-economic and other Young specialists means graduates of higher or vocational educa- criteria that reflect the existing level and degree of well-being tional institutions whose employment experience after gradua- of people and society in such fields as education, employment, tion does not exceed three years. health, human rights, income, infrastructure, culture, and leisure.

Moscow Stock Exchange means the exchange holding which is Near Field Communication (NFC) is a set of high-frequency wire- largest in Russia and Eastern Europe. less technologies that enables data exchange between devices within a short distance (a few centimeters). The advantage of this technology lies in the possibility of using devices that support Motivation means a mechanism to enhance performance and NFC for a variety of purposes. For example, NFC-based devices efficiency, the process of providing incentives to an employee or can act as bank cards, e-wallets, travel passes, keycards, identity staff group for engaging in activities that serve the company’s documents, etc. purpose.

Competences means knowledge, skills, abilities and behavioral IFRS means International Financial Reporting Standards. characteristics necessary for a job.

Occupational safety means a system of ensuring safety of life Corporate culture means a system of standards, values, attitudes and health of employees in the process of their labor activity, in- and commitments that predetermine the company’s way of cluding legal, social and economic, organizational and technical, addressing the issues of internal integration and external adapta- sanitary and hygienic, therapeutic and preventive, rehabilitation tion, and guiding and motivating day-to-day behavior of organi- and other measures. zation’s members while also being affected by this behavior.

HR management process means an end-to-end integrated hu- Corporate social responsibility (CSR) means the company’s re- man resource management system, which covers all stages of a sponsibility to stakeholders, which means that business decisions company’s interaction with employees, from attraction and hiring are taken with due regard to the interests of stakeholders. It is to the retirement and post-retirement support. a part of the company’s ongoing strategy to increase its presence in society and to develop its business; it is also a chance to make a positive impact on the community in which the company Personnel development means a system of activities implement- operates. ed by the Company with the purpose of recruitment, adaptation, and retention of employees and contributing to the fulfillment of their professional and creative potential. Corporate volunteering means voluntary activities of employees for the good of society, based on the Company’s CSR strategy. Corporate volunteering is supported and encouraged by the Restructuring means an end-to-end transformation of company’s Company. activities including changes in production pattern, assets, liabili- ties as well as in its management system with the aim to increase its soundness, profitability and competitiveness as well as to Corporate values means corporate culture components that have overcome unprofitability or to modify production’s organizational special emphasis in the minds of the Company’s employees thus structure. governing their social behavior.

Rotation means transfer of employees to a higher-level posi- Corporate Centre (CC) means a management structure engaged tion in another region (vertical inter-regional rotation) or to a in centralized management functions with regard to the Compa- same-level position in another business unit (horizontal rotation) ny’s business units and their member affiliated companies and in order to enable them to acquire new skills and to broaden foreign subsidiaries (FS). their horizons thus contributing to better performance of their professional duties

168 Glossary Roaming means a special communication (mobile telephony, Sponsor means an individual or legal entity who finances any Wi-Fi) service offered to subscribers outside of their “domestic” activities of other individuals or legal entities. Sponsor provides mobile operator’s coverage area by using resources of other financing without deriving any material benefit or profit from it. network operators. The subscribers are not required to enter into an agreement with the “hosting” operator and the service fee is charged to their accounts. When using the voice roaming service High-Definition Television, HDTV means a set of high-quality TV the subscriber usually retains his/her existing mobile telephone broadcasting standards based on modern standards of image number. scanning that provide a greater resolution compared to standard-definition TV and uses the latest digital video and audio coding standards. Social partnership means constructive and mutually beneficial cooperation between three sectors of society: government agencies, commercial enterprises and nonprofit organizations Machine-to-Machine, M2M means services that ensure direct in order to address the social issues for the benefit of the entire communication between devices (machines) using wired and population or local communities. wireless technologies. The term M2M implies that telecommunications and IT technologies are combined in order to transfer data between devices over large distances. M2M services are Social programs means activities that the Company voluntarily used in security applications, automation of industrial processes, engages in to develop and stimulate personnel, create favora- logistics, health care, “smart home” systems, etc. ble working conditions, develop corporate culture and support the local community and charity; such activities have systemic nature, are associated with the Company’s business strategy and Sustainable business development means a consistent system of aim at meeting the balanced needs of various stakeholders. From economic and social activities based on ongoing interaction with the management point of view, a social program is a complex of stakeholders. That implies that the use of materials and human measures streamlined in terms of resources, action parties, and resources, the vector of investment and technology development timelines that ensure efficient addressing of internal (internal are well harmonized and focused on strengthening the current corporate program) or external corporate social tasks (external and future business potential. corporate program).

Broadband means high-speed Internet access that is much faster Social report (sustainable development report) means a docu- than traditional dial-up access and does not monopolize the ment offering a well-balanced analysis of the company’s impact phone line. In addition to its high speed, broadband is always on the economic, environmental and social spheres. on and ensures a so-called bidirectional communication, i.e. the ability to both receive and transmit data at high speeds.

2015 Sustainable Development Report 169 Contacts

G4-5 MTS PJSC

G4-31 4 Marksistskaya Str., Moscow, 109147, Russia

Phone: +7 (495) 911-71-51, 8 (800) 333-08-90

Fax: +7 (495) 911-65-69

Web: www.mtsgsm.com

Contact person:

Inna Pavlova, Head of CSR Project Corporate Social Responsibility Department (CSRD) MTS PJSC HR Management Block

Phone: +7 (916) 761-71-63

Email: [email protected]

For more information about the MTS Group see section “Additional Information” of our 2015 Annual Report.

170 Contacts Feedback Questionnaire

Dear readers,

You have read the 2015 Mobile TeleSystems Group Sustainable Development Report, which addresses a large audience of stakeholders. We would appreciate your feedback that will help us improve the quality and impact of our future reports.

1. Rate the report on a 5-point scale using the following criteria:

• Credibility and objectivity

• Completeness and materiality of information

• Structure of the report, information search convenience, style

2. What sections proved to be most interesting and useful for you.

______

3. What information do you think should be added to the next report?

______

______4. Which version of the annual report you prefer to use?

Printed

Electronic (pdf)

Electronic (interactive website)

5. Specify which group of stakeholders you belong to:

Employees of MTS PJSC

Employees of an AFK Sistema member company

Federal authorities

Regional authorities

Local self-governments

Contractors/vendors

Clients/consumers of goods and services

Business entities

Public organizations

Environmental organizations

Charitable organizations

Mass-media

Expert community

Other

You know that you can!